Unless the context otherwise indicates, references in this report to the terms
"MongoDB," "the Company," "we," "our" and "us" refer to MongoDB, Inc., its
divisions and its subsidiaries. The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with
(1) our interim unaudited condensed consolidated financial statements and
related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (2)
the 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" included in our Annual Report on Form 10-K
for the fiscal year ended January 31, 2020 (the "2020 Form 10-K"). All
information presented herein is based on our fiscal calendar, which ends January
31. Unless otherwise stated, references to particular years, quarters, months or
periods refer to our fiscal years ended January 31 and the associated quarters,
months and periods of those fiscal years.
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 (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements are often identified by the use
of words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "plan," "project," "will," "would" or the negative or
plural of these words or similar expressions or variations, including our
expectations regarding our future growth opportunity, revenue and revenue
growth, investments, strategy, operating expenses and the anticipated impact of
the global economic uncertainty and financial market conditions caused by the
COVID-19 pandemic on our business, results of operations and financial
condition. Such forward-looking statements are subject to a number of risks,
uncertainties, assumptions and other factors that could cause actual results and
the timing of certain events to differ materially from future results expressed
or implied by the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those identified
herein, and those discussed in the section titled "Risk Factors," set forth in
Part 2, Item 1A of this Quarterly Report on Form 10-Q. You should not rely upon
forward-looking statements as predictions of future events. Furthermore, such
forward-looking statements speak only as of the date of this report. Except as
required by law, we undertake no obligation to update any forward-looking
statements to reflect events or circumstances after the date of such statements.
Our corporate website is located at www.mongodb.com. We make available free of
charge, on or through our corporate website, our annual, quarterly and current
reports, and any amendments to those reports, as soon as reasonably practicable
after electronically filing such reports with, or furnishing such reports to,
the Securities and Exchange Commission ("SEC"). Information contained on our
corporate website is not part of this Quarterly Report on Form 10-Q or any other
report filed with or furnished to the SEC.
Overview
MongoDB is the leading modern, general purpose database platform. Our robust
platform enables developers to build and modernize applications rapidly and
cost-effectively across a broad range of use cases. Organizations can deploy our
platform at scale in the cloud, on-premise, or in a hybrid environment. Software
applications are redefining how organizations across industries engage with
their customers, operate their businesses and compete with each other. A
database is at the heart of every software application. As a result, selecting a
database is a highly strategic decision that directly affects developer
productivity, application performance and organizational competitiveness. Our
platform addresses the performance, scalability, flexibility and reliability
demands of modern applications, while maintaining the strengths of legacy
databases. Our business model combines the developer mindshare and adoption
benefits of open source with the economic benefits of a proprietary software
subscription business model. MongoDB is headquartered in New York City and our
total headcount was 2,020 as of April 30, 2020, an increase from 1,331 as of
April 30, 2019.
We generate revenue primarily from sales of subscriptions, which accounted for
96% and 94% of our total revenue for the three months ended April 30, 2020 and
2019, respectively. Our primary subscription package is MongoDB Enterprise
Advanced, which represented 49% and 54% of our subscription revenue for the
three months ended April 30, 2020 and 2019, respectively. MongoDB Enterprise
Advanced is our comprehensive offering for enterprise customers that can be run
in the cloud, on-premise or in a hybrid environment, and includes our
proprietary commercial database server, enterprise management capabilities, our
graphical user interface, analytics integrations, technical support and a
commercial license to our platform.
Many of our enterprise customers initially get to know our software by using
Community Server, which is our free-to-download version of our database that
includes the core functionality developers need to get started with MongoDB
without all the features of our commercial platform. As a result, our direct
sales prospects are often familiar with our platform and

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may have already built applications using our technology. We sell subscriptions
directly through our field and inside sales teams, as well as indirectly through
channel partners. Our subscription offerings are generally priced on a per
server basis, subject to a per server RAM limit. The majority of our
subscription contracts are one year in duration and invoiced upfront. When we
enter into multi-year subscriptions, we typically invoice the customer on an
annual basis.
We introduced MongoDB Atlas in June 2016. MongoDB Atlas is our hosted
multi-cloud database-as-a-service ("DBaaS") offering that includes comprehensive
infrastructure and management, which we run and manage in the cloud. During the
three months ended April 30, 2020 and 2019, MongoDB Atlas revenue represented
42% and 35% of our total revenue, respectively, reflecting the continued growth
of MongoDB Atlas since its introduction. We have experienced strong growth in
self-serve customers of MongoDB Atlas. These customers are charged monthly based
on their usage. In addition, we have also seen growth in MongoDB Atlas customers
sold by our sales force. These customers typically sign annual commitments and
pay in advance or are invoiced monthly based on usage. Given our platform has
been downloaded from our website more than 110 million times since February 2009
and over 40 million times in the last 12 months alone, a core component of our
growth strategy for MongoDB Atlas is to convert developers and their
organizations who are already using Community Server to become customers of
MongoDB Atlas and enjoy the benefits of a managed offering.
We also generate revenue from services, which consist primarily of fees
associated with consulting and training services. Revenue from services
accounted for 4% and 6% of our total revenue for the three months ended April
30, 2020 and 2019, respectively. We expect to continue to invest in our services
organization as we believe it plays an important role in accelerating our
customers' realization of the benefits of our platform, which helps drive
customer retention and expansion.
We believe the market for our offerings is large and growing. According to IDC,
the worldwide database software market, which it refers to as the data
management software market, is forecast to be $62 billion in 2020 growing to
approximately $89 billion in 2024, representing an 9% compound annual growth
rate. We have experienced rapid growth and have made substantial investments in
developing our platform and expanding our sales and marketing footprint. We
intend to continue to invest heavily to grow our business to take advantage of
our market opportunity rather than optimizing for profitability or cash flow in
the near term.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a
pandemic. This pandemic continues to spread throughout the U.S. and the world
and has resulted in authorities implementing numerous measures to contain the
virus, including travel bans and restrictions, quarantines, shelter-in-place
orders, and business limitations and shutdowns. The full extent of the impact of
the COVID-19 pandemic on our future operational and financial performance will
depend on certain developments, including the duration and spread of the
pandemic, related public health measures, their impact on the global economy and
their impact on our current and prospective customers, employees, vendors and
other parties with whom we do business, all of which are uncertain and cannot be
predicted.
We have adopted several measures in response to the COVID-19 pandemic, including
temporarily requiring employees to work remotely, suspending non-essential
travel by our employees, and replacing in-person marketing events (including our
annual developer conference) with virtual events.
While the broader implications of COVID-19 on our results of operations and
overall financial performance remain uncertain, we currently expect our revenue
to be negatively impacted by the slowdown in activity associated with the
COVID-19 pandemic and global uncertainty at least through fiscal 2021. In
addition, we recorded a higher allowance during the three months ended April 30,
2020 due to the potential adverse impact the COVID-19 pandemic may have on
factors that affect our estimate of current expected credit losses, including
possible financial difficulties faced by a portion of our customers, in
accordance with the recently adopted accounting standard for credit losses.
During the three months ended April 30, 2020, we experienced a decrease in our
travel costs due to global travel restrictions and stay-at-home or similar
orders in effect as a result of the COVID-19 pandemic. We expect those lower
travel costs to continue in the near-term. We intend to invest a portion of
these expected savings in additional marketing program spend and research and
development headcount.
We will continue to evaluate the nature and extent of the impact of COVID-19 on
our business. For further discussion of the potential impacts of the COVID-19
pandemic on our business, operating results, and financial condition, see the
section titled "Risk Factors" included in Part II, Item 1A of this Quarterly
Report on Form 10-Q. Other factors affecting our performance are discussed
below, although we caution you that the COVID-19 pandemic may also further
impact these factors.

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Key Factors Affecting Our Performance
Growing Our Customer Base and Expanding Our Global Reach
We are intensely focused on continuing to grow our customer base. We have
invested, and expect to continue to invest, heavily in our sales and marketing
efforts and developer community outreach, which are critical to driving customer
acquisition. As of April 30, 2020, we had over 18,400 customers across a wide
range of industries and in over 100 countries, compared to over 14,200 customers
as of April 30, 2019. All affiliated entities are counted as a single customer.
Our customer count as of April 30, 2020 includes customers acquired from
ObjectLabs Corporation ("mLab") and Tightdb, Inc. ("Realm"), which acquisitions
closed on November 1, 2018 and May 7, 2019, respectively. Our definition of
"customer" excludes (1) users of our free offerings, (2) users acquired from
mLab who spend $20 or less per month with us and (3) self-serve users acquired
from Realm. The excluded mLab and Realm users collectively represent an
immaterial portion of the revenue associated with users acquired from those
acquisitions.
As of April 30, 2020, we had over 2,200 customers that were sold through our
direct sales force and channel partners, as compared to over 1,800 such
customers as of April 30, 2019. These customers, which we refer to as our Direct
Sales Customers, accounted for 79% and 77% of our subscription revenue for the
three months ended April 30, 2020 and 2019, respectively. We are also focused on
increasing the number of MongoDB Atlas customers as we emphasize the on-demand
scalability of MongoDB Atlas by allowing our customers to consume the product
with minimal commitment. After launching in June 2016, we had over 16,800
MongoDB Atlas customers as of April 30, 2020. The growth in MongoDB Atlas
customers included customers from mLab and Realm, as described above, as well as
new customers to MongoDB and existing MongoDB Enterprise Advanced customers
adding incremental MongoDB Atlas workloads.
In an effort to expand our global reach, in October 2019, we announced a
partnership with Alibaba Cloud to offer an authorized MongoDB-as-a-service
solution allowing customers of Alibaba Cloud to use this managed offering from
their data centers globally.
Increasing Adoption of MongoDB Atlas
MongoDB Atlas, our hosted multi-cloud offering, is an important part of our
run-anywhere strategy. and allows us to generate revenue from Community Server,
converting users of the free-to-download version of our database to customers.
To accelerate adoption of this DBaaS offering, in 2017, we introduced tools to
easily migrate existing users of our Community Server offering to MongoDB
Atlas. We have also expanded our introductory offerings for MongoDB Atlas,
including a free tier, which provides limited processing power and storage in
order to drive usage and adoption of MongoDB Atlas among developers. Our MongoDB
Atlas free tier offering is now available on all three major cloud providers
(Amazon Web Services ("AWS"), Google Cloud Platform ("GCP") and Microsoft Azure)
in North America, Europe and Asia Pacific. In addition, MongoDB Atlas is
available on AWS Marketplace, making it easier for AWS customers to buy and
consume MongoDB Atlas. Our business partnership with GCP provides deeper product
integration and unified billing for GCP customers who are also MongoDB Atlas
customers and offers GCP customers a seamless integration between MongoDB Atlas
and GCP. In 2019, we announced an expanded relationship with Microsoft. The new
availability of MongoDB Atlas on the Microsoft Azure Marketplace
will offer unified billing for joint customers of MongoDB Atlas and Microsoft
and will make it easier for established Azure customers to purchase and use
MongoDB Atlas. In addition, MongoDB will be part of Microsoft's strategic
partner program.
We have also expanded the functionality available in MongoDB Atlas beyond that
of our Community Server offering. We expect this will drive further adoption of
MongoDB Atlas as companies migrate mission-critical applications to the public
cloud. The enterprise capabilities that we have introduced to MongoDB Atlas
include advanced security features, enterprise-standard authentication and
database auditing. We have invested significantly in MongoDB Atlas and our
ability to drive adoption of MongoDB Atlas is a key component of our growth
strategy.
Retaining and Expanding Revenue from Existing Customers
The economic attractiveness of our subscription-based model is driven by
customer renewals and increasing existing customer subscriptions over time,
referred to as land-and-expand. We believe that there is a significant
opportunity to drive additional sales to existing customers, and expect to
invest in sales and marketing and customer success personnel and activities to
achieve additional revenue growth from existing customers. If an application
grows and requires additional capacity, our customers increase their
subscriptions to our platform. In addition, our customers expand their
subscriptions to our platform as they migrate additional existing applications
or build new applications, either within the same department or

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in other lines of business or geographies. Also, as customers modernize their
information technology infrastructure and move to the cloud, they may migrate
applications from legacy databases. Our goal is to increase the number of
customers that standardize on our database within their organization, which can
include offering centralized internal support or providing MongoDB-as-a-service
internally. Over time, the average subscription amount for our Direct Sales
Customers has increased. In addition, self-service customers have begun to
increase their consumption of our products, particularly MongoDB Atlas.
We calculate annualized recurring revenue ("ARR") and annualized monthly
recurring revenue ("MRR") to help us measure our subscription revenue
performance. ARR includes the revenue we expect to receive from our customers
over the following 12 months based on contractual commitments and, in the case
of Direct Sales Customers of MongoDB Atlas, by annualizing the prior 90 days of
their actual consumption of MongoDB Atlas, assuming no increases or reductions
in their subscriptions or usage. For all other customers of our self-serve
products, we calculate annualized MRR by annualizing the prior 30 days of their
actual consumption of such products, assuming no increases or reductions in
usage. ARR and annualized MRR exclude professional services. The number of
customers with $100,000 or greater in ARR and annualized MRR was 780 and 598 as
of April 30, 2020 and 2019, respectively. Prior to January 31, 2020, ARR related
to Direct Sales Customers of MongoDB Atlas was based on their contractual
commitments, regardless of their actual consumption. To better reflect actual
customer behavior, we modified our ARR calculation related to Direct Sales
Customers of MongodDB Atlas to incorporate their prior 90 days of actual
consumption. The impact of this change on prior reported periods is immaterial.
Our ability to increase sales to existing customers will depend on a number of
factors, including customers' satisfaction or dissatisfaction with our products
and services, competition, pricing, economic conditions or overall changes in
our customers' spending levels.
Components of Results of Operations
Revenue
Subscription Revenue. Our subscription revenue is comprised of term licenses and
hosted as-a-service solutions. Subscriptions to term licenses include technical
support and access to new software versions on a when-and-if available basis.
Revenue from our term licenses is recognized upfront for the license component
and ratably for the technical support and when-and-if available update
components. Revenue from term licenses is typically billed annually in advance.
Revenue from our hosted as­a­service solutions is primarily generated on a usage
basis and is billed either in arrears or paid up front. The majority of our
subscription contracts are one year in duration and are invoiced upfront. Our
subscription contracts are generally non-cancelable and non-refundable. When we
enter into multi-year subscriptions, we typically invoice the customer on an
annual basis.
Services Revenue. Services revenue is comprised of consulting and training
services and is recognized over the period of delivery of the applicable
services. We recognize revenue from services agreements as services are
delivered.
We expect our revenue may vary from period to period based on, among other
things, the timing and size of new subscriptions, the proportion of term license
contracts that commence within the period, the rate of customer renewals and
expansions, delivery of professional services, the impact of significant
transactions and seasonality of or fluctuations in usage for our
consumption­based customers.
Cost of Revenue
Cost of Subscription Revenue. Cost of subscription revenue primarily includes
personnel costs, including salaries, bonuses and benefits, and stock­based
compensation, for employees associated with our subscription arrangements
principally related to technical support and allocated shared costs, as well as
depreciation and amortization. Our cost of subscription revenue for our hosted
as­a­service solutions includes third-party cloud infrastructure expenses. We
expect our cost of subscription revenue to increase in absolute dollars as our
subscription revenue increases and, depending on the results of MongoDB Atlas,
our cost of subscription revenue may increase as a percentage of subscription
revenue as well.
Cost of Services Revenue. Cost of services revenue primarily includes personnel
costs, including salaries, bonuses and benefits, and stock­based compensation,
for employees associated with our professional service contracts, as well as
travel costs, allocated shared costs and depreciation and amortization. We
expect our cost of services revenue to increase in absolute dollars as our
services revenue increases.
Gross Profit and Gross Margin
Gross Profit. Gross profit represents revenue less cost of revenue.

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Gross Margin. Gross margin, or gross profit as a percentage of revenue, has been
and will continue to be affected by a variety of factors, including the average
sales price of our products and services, the mix of products sold, transaction
volume growth and the mix of revenue between subscriptions and services. We
expect our gross margin to fluctuate over time depending on the factors
described above and, to the extent MongoDB Atlas revenue increases as a
percentage of total revenue, our gross margin may decline as a result of the
associated hosting costs of MongoDB Atlas.
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 each category of operating expenses. Operating expenses
also include travel and related costs and allocated overhead costs for
facilities, information technology and employee benefit costs.
Sales and Marketing. Sales and marketing expense consists primarily of personnel
costs, including salaries, sales commission and benefits, bonuses and
stock­based compensation. These expenses also include costs related to marketing
programs, travel­related expenses and allocated overhead. Marketing programs
consist of advertising, events, corporate communications, and brand­building and
developer­community activities. We expect our sales and marketing expense to
increase in absolute dollars over time as we expand our sales force and increase
our marketing resources, expand into new markets and further develop our
self-serve and partner channels.
Research and Development. Research and development expense consists primarily of
personnel costs, including salaries, bonuses and benefits, and stock­based
compensation. It also includes amortization associated with intangible acquired
assets and allocated overhead. We expect our research and development expenses
to continue to increase in absolute dollars, as we continue to invest in our
platform and develop new products.
General and Administrative. General and administrative expense consists
primarily of personnel costs, including salaries, bonuses and benefits, and
stock­based compensation for administrative functions including finance, legal,
human resources and external legal and accounting fees, as well as allocated
overhead. We expect general and administrative expense to increase in absolute
dollars over time as we continue to invest in the growth of our business and
incur the costs of compliance associated with being a publicly traded company.
Other Income (Expense), net
Other income (expense), net consists primarily of interest income, interest
expense and gains and losses from foreign currency transactions.
Provision (Benefit) for Income Taxes
Provision for income taxes consists primarily of state income taxes in the
United States and income taxes in certain foreign jurisdictions in which we
conduct business. As of January 31, 2020, we had net operating loss ("NOL")
carryforwards for federal, state, Irish and United Kingdom income tax purposes
of $659.7 million, $475.3 million, $258.8 million and $7.2 million,
respectively, which begin to expire in the year ending January 31, 2028 for
federal purposes and January 31, 2020 for state purposes. Ireland, U.K. and the
U.S. federal NOLs for the years after January 31, 2018 are allowed to be carried
forward indefinitely. The deferred tax assets associated with the NOL
carryforwards in each of these jurisdictions are subject to a full valuation
allowance. Under Section 382 of the U.S. Internal Revenue Code of 1986 (the
"Code"), a corporation that experiences an "ownership change" is subject to a
limitation on its ability to utilize its pre-change NOLs to offset future
taxable income. Utilization of the federal NOL carryforwards and credits may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Code, as amended and similar state provisions. The
annual limitation, should the Company undergo an ownership change, may result in
the expiration of federal or state net operating losses and credits before
utilization, however the Company does not expect any such limitation to be
material.
Three Months Ended April 30, 2020 Summary
For the three months ended April 30, 2020, our total revenue was $130.3 million
as compared to $89.4 million for the three months ended April 30, 2019. Our net
loss was $54.0 million for the three months ended April 30, 2020 as compared to
$33.2 million for the three months ended April 30, 2019.

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Our operating cash flow was $(5.9) million and $3.2 million for the three months
ended April 30, 2020 and 2019, respectively. Our free cash flow was $(8.5)
million and $2.8 million for the three months ended April 30, 2020 and 2019,
respectively. See the section titled "Liquidity and Capital Resources-Non-GAAP
Free Cash Flow" below.
Results of Operations
The following tables set forth our results of operations for the periods
presented in dollars (unaudited, in thousands) and as a percentage of our total
revenue. Percentage of revenue figures are rounded and therefore may not
subtotal exactly.
                                                Three Months Ended April 30,
                                                  2020                 2019
Consolidated Statements of Operations Data:
Revenue:
Subscription                                $      124,856       $       83,994
Services                                             5,473                5,394
Total revenue                                      130,329               89,388
Cost of revenue:
Subscription(1)                                     30,625               22,595
Services(1)                                          7,052                5,577
Total cost of revenue                               37,677               28,172
Gross profit                                        92,652               61,216
Operating expenses:
Sales and marketing(1)                              69,125               46,120
Research and development(1)                         45,632               30,868
General and administrative(1)                       19,935               14,805
Total operating expenses                           134,692               91,793
Loss from operations                               (42,040 )            (30,577 )
Other expense, net                                 (11,693 )             (2,801 )
Loss before provision for income taxes             (53,733 )            (33,378 )
Provision (benefit) for income taxes                   234                 (138 )
Net loss                                    $      (53,967 )     $      (33,240 )

(1) Includes stock­based compensation expense as follows (unaudited, in


     thousands):


                                             Three Months Ended April 30,
                                                   2020                  2019
Cost of revenue-subscription           $         1,827                 $    988
Cost of revenue-services                         1,146                      593
Sales and marketing                             10,823                    4,940
Research and development                        11,759                    4,520
General and administrative                       5,012                    2,968
Total stock­based compensation expense $        30,567                 $ 14,009




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                                          Three Months Ended April 30,
                                            2020                2019
Percentage of Revenue Data:
Revenue:
Subscription                                 96  %               94  %
Services                                      4  %                6  %
Total revenue                               100  %              100  %
Cost of revenue:
Subscription                                 23  %               25  %
Services                                      5  %                6  %
Total cost of revenue                        29  %               32  %
Gross profit                                 71  %               68  %
Operating expenses:
Sales and marketing                          53  %               52  %
Research and development                     35  %               35  %
General and administrative                   15  %               17  %
Total operating expenses                    103  %              103  %
Loss from operations                        (32 )%              (34 )%
Other expense, net                           (9 )%               (3 )%
Loss before provision for income taxes      (41 )%              (37 )%
Provision (benefit) for income taxes          -  %                -  %
Net loss                                    (41 )%              (37 )%


Comparison of the Three Months Ended April 30, 2020 and 2019
Revenue
                                Three Months Ended April 30,               Change
(unaudited, in thousands)             2020                  2019          $        %
Subscription              $        124,856                $ 83,994    $ 40,862    49 %
Services                             5,473                   5,394          79     1 %
Total revenue             $        130,329                $ 89,388    $ 40,941    46 %

Total revenue growth reflects increased demand for our platform and related services. Subscription revenue increased by $40.9 million primarily due to $18.1 million from sales to new customers. The remainder of the increase in subscription revenue resulted from sales to our existing customers. The increase in services revenue was driven primarily by an increase in sales of professional services to new customers.



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Cost of Revenue, Gross Profit and Gross Margin Percentage


                                Three Months Ended April 30,            Change
(unaudited, in thousands)          2020               2019             $        %
Subscription cost of revenue $     30,625        $     22,595      $  8,030    36 %
Services cost of revenue            7,052               5,577         1,475    26 %
Total cost of revenue              37,677              28,172         9,505    34 %
Gross profit                 $     92,652        $     61,216      $ 31,436    51 %
Gross margin                           71  %               68  %
Subscription                           75  %               73  %
Services                              (29 )%               (3 )%

The increase in subscription cost of revenue was primarily due to a $5.6 million increase in third­party cloud infrastructure costs, including costs associated with the growth of MongoDB Atlas, as well as a $1.7 million increase in personnel costs and stock-based compensation associated with increased headcount in our support organization. We continue to optimize our subscription cost of revenue, in particular by realizing efficiencies in our third-party cloud infrastructure costs as we continue to scale our business with respect to MongoDB Atlas. The increase in services cost of revenue was primarily due to higher headcount in our services organization. Total headcount in our support and services organizations increased 22% from April 30, 2019 to April 30, 2020. Our overall gross margin increased due to higher subscription gross margin, which was driven, in part, by efficiencies realized in managing our third-party cloud infrastructure costs. Our services gross margin is subject to fluctuations as a result of timing of sales of standalone consulting and training services. Operating Expenses Sales and Marketing


                                Three Months Ended April 30,               Change
(unaudited, in thousands)             2020                  2019          $        %
Sales and marketing       $        69,125                 $ 46,120    $ 23,005    50 %

The increase in sales and marketing expense included $18.7 million from higher personnel costs and stock-based compensation, driven by an increase in our sales and marketing headcount to 922 as of April 30, 2020 from 527 as of April 30, 2019, largely in non-quota-carrying roles including sales operations, customer success and marketing roles. Sales and marketing expense also increased $4.3 million from costs associated with our higher headcount, including higher commissions expense and higher facilities and computer hardware and software expenses. In addition, expenses increased $1.5 million due to higher spend on marketing programs. These increases were partially offset by lower travel costs, primarily as a result of global travel restrictions and stay-at-home or similar orders in effect due to the COVID-19 pandemic. Research and Development


                                Three Months Ended April 30,               Change
(unaudited, in thousands)             2020                  2019          $        %
Research and development  $        45,632                 $ 30,868    $ 14,764    48 %


The increase in research and development expense was primarily driven by a $13.5
million increase in personnel costs and stock-based compensation as we increased
our research and development headcount by 37%.
General and Administrative
                                 Three Months Ended April 30,              Change
(unaudited, in thousands)              2020                  2019         $        %
General and administrative $        19,935                 $ 14,805    $ 5,130    35 %

The increase in general and administrative expense was due to higher costs to support the growth of our business and to maintain compliance as a public company. In particular, these higher costs were driven by an increase in general and



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administrative personnel headcount resulting in higher personnel costs and
stock-based compensation. The prior-year period included $0.3 million of costs
associated with our acquisition of Realm, with no comparable costs for the three
months ended April 30, 2020.
Other Income (Expense), net
                              Three Months Ended April 30,             Change
(unaudited, in thousands)       2020                2019             $          %
Other expense, net        $      (11,693 )     $      (2,801 )   $ (8,892 )   317 %

The increase in other expense, net for the three months ended April 30, 2020 was primarily due to the amortization of debt discount and issuance costs, as well as interest expense, associated with our 0.25% convertible senior notes due 2026, which we issued in January 2020. Provision (Benefit) for Income Taxes


                                     Three Months Ended April 30,              Change
(unaudited, in thousands)                 2020            2019            $              %

Provision (benefit) for income taxes $ 234 $ (138 ) $ 372 (270 )%




The provision for income taxes during the three months ended April 30, 2020 was
primarily due to an increase in foreign taxes as we continued our global
expansion. The benefit during the three months ended April 30, 2019 was
primarily due to stock option exercises, which generated excess tax deductions
in the United Kingdom.
Liquidity and Capital Resources
As of April 30, 2020, we had cash, cash equivalents, short­term investments and
restricted cash totaling $977.5 million. Our cash and cash equivalents primarily
consist of bank deposits and money market funds. Our short­term investments
consist of U.S. government treasury securities and our restricted cash
represents collateral for our available credit on corporate credit cards. We
believe our existing cash and cash equivalents and short­term investments will
be sufficient to fund our operating and capital needs for at least the next
12 months.
We have generated significant operating losses and negative cash flows from
operations as reflected in our accumulated deficit and condensed consolidated
statements of cash flows. As of April 30, 2020, we had an accumulated deficit of
$722.4 million. We expect to continue to incur operating losses and negative
cash flows from operations in the future and may require additional capital
resources to execute strategic initiatives to grow our business. Our future
capital requirements and adequacy of available funds will depend on many factors
including our growth rate, the timing and extent of spending to support
development efforts, the expansion of sales and marketing and international
operation activities, the timing of new subscription introductions, the
continuing market acceptance of our subscriptions and services and the impact of
the COVID-19 pandemic on the global economy and our business, financial
condition and results of operations. As the impact of the COVID-19 pandemic on
the global economy and our operations evolves, we will continue to assess our
liquidity needs. We may in the future enter into arrangements to acquire or
invest in complementary businesses, services and technologies, including
intellectual property rights. We may be required to seek additional equity or
debt financing. In the event that additional financing is required from outside
sources, we may not be able to raise it on terms acceptable to us or at all. If
we are unable to raise additional capital when desired, our business, operating
results and financial condition would be adversely affected.
The following table summarizes our cash flows for the periods presented
(unaudited, in thousands):
                                                             Three Months Ended April 30,
                                                                2020                2019

Net cash provided by (used in) operating activities $ (5,878 ) $ 3,214 Net cash provided by investing activities

                          3,212                 587
Net cash provided by (used in) financing activities               (2,290 )             6,407



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Non­GAAP Free Cash Flow To supplement our interim unaudited condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we provide investors with the amount of free cash flow, which is a non­GAAP financial measure. Free cash flow represents net cash used in operating activities less capital expenditures, principal repayments of finance lease liabilities and capitalized software development costs, if any. During the three months ended April 30, 2020 and 2019, we did not capitalize any software development costs. Free cash flow is a measure used by management to understand and evaluate our liquidity and to generate future operating plans. The exclusion of capital expenditures, principal repayments of finance lease liabilities and amounts capitalized for software development facilitates comparisons of our liquidity on a period­to­period basis and excludes items that we do not consider to be indicative of our liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our management, investors and others in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business in the same manner as our management and Board of Directors. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies and therefore comparability may be limited. You should consider free cash flow alongside our other GAAP­based financial performance measures, such as net cash used in operating activities, and our other GAAP financial results. The following table presents a reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP measure, for each of the periods indicated (unaudited, in thousands):


                                                    Three Months Ended April 30,
                                                       2020                2019

Net cash provided (used in) operating activities $ (5,878 ) $ 3,214 Capital expenditures

                                     (1,505 )             (389 )
Principal repayments of finance leases                   (1,135 )                -
Capitalized software                                          -                  -
Free cash flow                                   $       (8,518 )     $      2,825


Operating Activities
Cash used in operating activities during the three months ended April 30, 2020
was $5.9 million primarily driven by our net loss of $54.0 million and was
partially offset by non­cash charges of $30.6 million for stock­based
compensation, $12.0 million for the amortization of our debt discount and
issuance costs, $2.9 million for depreciation and amortization and $2.4 million
for lease-related non-cash charges. In addition, our cash collections decreased
our accounts receivable by $3.6 million and increased our deferred revenue by
$3.3 million, reflecting the overall growth of our sales and our expanding
customer base. Partially offsetting these benefits to our operating cash flow
were decreases of $3.1 million in deferred commissions and $2.8 million in
accrued liabilities, primarily from commissions and bonuses paid during the
three months ended April 30, 2020.
Cash provided by operating activities during the three months ended April 30,
2019 was $3.2 million primarily driven by cash collections, which decreased our
accounts receivable by $11.0 million and increased our deferred revenue by $6.3
million, reflecting the overall growth of our sales and our expanding customer
base. Also, our accrued liabilities increased $3.3 million, primarily from
commissions accrued as of April 30, 2019. In addition, our net loss of $33.2
million included non­cash charges of $14.0 million for stock­based
compensation, $3.2 million for the amortization of our debt discount and
issuance costs and $2.3 million for depreciation and amortization. Partially
offsetting these benefits to our operating cash flow were an increase of $3.0
million in deferred commissions and an increase of $0.3 million in prepaid
expenses.
Investing Activities
Cash provided by investing activities during the three months ended April 30,
2020 and 2019 of $3.2 million and $0.6 million, respectively, resulted from the
maturities of marketable securities, partially offset by purchases of marketable
securities and property and equipment.

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Financing Activities
Cash used in financing activities during the three months ended April 30, 2020
was $2.3 million primarily due to issuance costs related to our January 2020
offering of 0.25% convertible senior notes due 2026 that had been accrued as of
January 31, 2020, as well as principal repayment of finance leases, partially
offset by the proceeds from the exercise of stock options.
Cash provided by financing activities during the three months ended April 30,
2019 was $6.4 million primarily due to the proceeds from the exercise of stock
options.
Seasonality
We have in the past and expect in the future to experience seasonal fluctuations
in our revenue and results from time to time. In addition, as a result of the
adoption of Accounting Standards Update No. 2014­09, Revenue from Contracts with
Customers (Topic 606), we may experience greater variability and reduced
comparability of our quarterly revenue and results with respect to the timing
and nature of certain of our contracts, particularly multi-year contracts that
contain a term license.
Off Balance Sheet Arrangements
As of April 30, 2020, we did not have any relationships with any entities or
financial partnerships, such as structured finance or special purpose entities
that would have been established for the purpose of facilitating off­balance
sheet arrangements or other purposes.
Contractual Obligations and Commitments
During the three months ended April 30, 2020, there have been no material
changes outside the ordinary course of business to our contractual obligations
and commitments from those disclosed in our 2020 Form 10-K. Refer to Note 6,
Leases and Note 7, Commitments and Contingencies, in our Notes to Unaudited
Condensed Consolidated Financial Statements included in Part I, Item 1 of this
Quarterly Report on Form 10-Q for further details.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with GAAP. The preparation
of these financial statements requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, expenses and
related disclosures. We evaluate our estimates and assumptions on an ongoing
basis. Our estimates are based on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Our actual
results could differ from these estimates.
There have been no material changes in our critical accounting policies from
those disclosed in Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of the 2020 Form 10-K.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies, in our Notes to
Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1
of this Quarterly Report on Form 10-Q for a discussion of recent accounting
pronouncements, including our adoption of the new credit loss standard under
Accounting Standards Codification 326.

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