ANAPLAN, INC.

(PLAN)
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ANAPLAN, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

03/23/2022 | 03:26pm EDT
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this Annual Report on Form
10-K. Discussion regarding our financial condition and results of operations for
fiscal 2020 and year-to-year comparisons between fiscal 2021 and fiscal 2020 is
included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended
January 31, 2021, filed with the SEC on March 12, 2021. This discussion contains
forward-looking statements that involve risks and uncertainties as discussed in
"Cautionary Note Regarding Forward-Looking Statements" included in this Annual
Report on Form 10-K. Our actual results could differ materially from those
discussed below. Factors that could cause or contribute to such differences
include, but are not limited to, impacts on our business and general economic
conditions due to the current COVID-19 pandemic, those identified below and
those discussed in "Risk Factors" under Part I, Item 1A in this Annual Report on
Form 10-K. Our fiscal year ends January 31.

                                    Overview

Anaplan is a market-leading cloud-native enterprise SaaS company, transforming
how enterprises across industries see, plan, and drive their business. Powered
by our proprietary calculation engine and Hyperblock® technology, our platform
lets customers model what-if scenarios, contextualize current performance in
real time, and forecast future outcomes for faster, more confident decisions.
Embracing constant change, our customers use Anaplan to rapidly pivot
strategies, redeploy resources, and optimize plans for growth, efficiency,
demand, and profitability. Anaplan equips teams to overcome obstacles and seize
opportunities ahead of competitors.

Our customers often initially adopt our platform within a specific business
function for one or more planning solutions, but also because our platform has
the capacity to transform their enterprise-wide planning process through our
integrated planning and forecasting tool and as part of a broader digital
transformation initiative. We sell subscriptions to our cloud-based planning
platform through our direct sales team and through our global partnership
ecosystem that serves as an integral part of our go-to-market strategy and an
extension of our direct sales force. Our strategic consulting and systems
integration partners provide us with a significant source of lead generation and
implementation leverage. These partners act as strategic advisors to senior
executives in corporate, functional, and process transformation initiatives of
organizations. They often promote our platform as their clients examine how to
plan more effectively or seek organizational change through digital
transformation or improved business processes. We also rely on partners with
deep subject-matter expertise in the implementation of specific use cases who
can facilitate implementations for our customers. Our partners also help to
drive thought leadership in promoting connected planning and digital
transformation.

Once our customers see the benefits and wide applicability of our platform, we
use a "land and expand" sales strategy to encourage our existing customers to
increase the number of users, add new use cases, and expand to additional lines
of business, divisions, and geographies. This expansion often generates a
natural network effect in which the value of our platform to customers increases
as more use cases are adopted, more users are connected, and greater amounts of
data are incorporated in our platform delivering exponential value to our
customers.

We see a greenfield opportunity to help over 70 million knowledge workers around the world plan more efficiently using Anaplan's platform.


We derive the substantial majority of our revenue from subscriptions for users
on our platform. Our initial subscription term is typically two to three years,
although some customers commit for shorter periods. We generally bill our
customers annually in advance. We also offer professional services, including
consulting, implementation, and training, but are increasingly leveraging our
partners to provide these services. During fiscal 2022, 2021, and 2020,
subscription revenue was $536.5 million, $408.2 million and $307.9 million,
respectively, representing a year-over-year subscription revenue growth rate
of 31% and 33% in fiscal 2022 and 2021, respectively. During fiscal 2022, 2021,
and 2020, services revenue was $55.7 million, $39.6 million and $40.1 million,
respectively. Our subscription revenue as a percentage of total revenue was 91%,
91% and 88% in fiscal 2022, 2021, and 2020, respectively.

During fiscal 2022, 2021, and 2020, our total revenue was $592.2 million, $447.8
million and $348.0 million, respectively. Approximately 47%, 46% and 43% of our
revenue was generated from outside of the United States in fiscal 2022, 2021,
and 2020, respectively. Our net loss was $203.6 million, $154.0 million and
$149.2 million in fiscal 2022, 2021, and 2020, respectively.
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We believe that our focus on customer success allows us to retain and expand the
subscription revenue generated from our existing customers, and is an indicator
of the long-term value of our customer relationships for Anaplan as a whole. We
track our performance in this area by measuring our dollar-based net expansion
rate, which compares our annual recurring revenue from the same set of customers
across comparable periods. The dollar-based net expansion rate was 118% and 114%
as of January 31, 2022 and 2021, respectively.

Our dollar-based net expansion rate equals the annual recurring revenue at the
end of a period for a base set of customers from which we generated annual
recurring revenue in the year prior to the date of calculation, divided by the
annual recurring revenue one year prior to the date of the calculation for that
same set of customers. Annual recurring revenue is calculated as subscription
revenue already booked and in backlog that will be recorded over the next 12
months, assuming any contract expiring in those 12 months is renewed and
continues on its existing terms and at its prevailing rate of utilization.

The number of customers with greater than $250,000 of annual recurring revenue
was 555, 453 and 353 as of January 31, 2022, 2021, and 2020, respectively. We
monitor this metric and believe it is a useful tool to investors, as an
indicator of the scale of customer adoption and expansion of our platform.

We define calculated billings as total revenue plus the change in deferred
revenue in the period. Calculated billings in any particular period is comprised
of subscription contracts with existing customers (including renewal contracts
and add-on contracts), subscription contracts with new customers, and contracts
for professional services. Calculated billings is intended to provide
information about our subscription revenue growth over time and can typically be
seen as an early indicator of trends in revenue growth. While calculated
billings can increase as our revenues grow, it may significantly fluctuate from
period to period for several reasons, including the timing of contracted
billings, the timing of renewals, and other factors. See Part I, Item 1A, "Risk
Factors-Operational Risks-The sum of our revenue and changes in deferred revenue
may not be an accurate indicator of business activity within a period" for a
description of some limitations in the use of calculated billings.

Calculated billings is calculated as follows:

                                                     Year Ended January 31,
                                                       2022              2021
                                                         (In thousands)
Total revenue                                   $    592,176          $ 447,755
Add: Deferred revenue (end of period)                382,153            

295,543

Less: Deferred revenue (beginning of period) (295,543) (220,208) Calculated billings

                             $    678,786          $ 523,090


We regularly evaluate acquisitions or investment opportunities in complementary
businesses, services and technologies and intellectual property rights as a
means to expand our offerings through a disciplined and strategic acquisition
process. We may continue to make such acquisitions and investments in the
future, and we plan to reinvest a significant portion of our incremental revenue
in future periods to grow our business.


                                     Merger

On March 20, 2022, we entered into the Merger Agreement with Parent and Merger
Sub, providing for the merger of Merger Sub with and into our Company, with our
Company surviving the Merger as a wholly owned subsidiary of Parent.

Under the terms of the agreement, our stockholders will receive $66.00 in cash
for each share of common stock they hold on the transaction closing date. The
obligation of the parties to consummate the acquisition is subject to the
satisfaction or waiver of customary closing conditions, including, without
limitation, the absence of governmental orders resulting, directly or
indirectly, in enjoining or otherwise prohibiting or making illegal the
consummation of the Merger, the affirmative vote of the holders of a majority of
the voting power of the outstanding shares of the Company's common stock
entitled to vote on the adoption of the Merger Agreement, and expiration or
termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. We are subject to customary restrictions on
our ability to solicit alternative acquisition proposals from third parties and
to provide non-public information to, and participate in discussions and engage
in negotiations with, third parties regarding alternative acquisition proposals,
with customary exceptions for superior proposals. For a summary of the
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transaction, see Note 12, "Subsequent Event" of the notes to our Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form
10-K and to our Form 8-K filed with the SEC on March 20, 2022.

                                COVID-19 Update

The COVID-19 pandemic continues to persist. The broader implications of the
COVID-19 pandemic on our business, results of operations, and overall financial
performance remain uncertain. We have seen and may continue to see in certain
geographies some of our customers and prospective customers defer or delay
buying decisions and project implementations and prolonged sales cycles. These
and other changes in customer demand for our solutions could materially and
adversely impact our business, results of operations, and overall financial
performance in future periods.
As the impact of the COVID-19 pandemic continues to unfold around the world, we
remain focused on supporting our employees, customers, and partners. In response
to the COVID-19 pandemic, we modified the manner in which we operate and we
required our employees to work remotely, maintained business-related travel
restrictions, and virtualized, postponed or cancelled our sales and marketing,
employee or industry events. We are slowly reversing certain of these
modifications to our operations on a market-by-market basis in accordance with
local guidelines, but currently employ a hybrid work approach in most regions.
Our approach may vary among geographies depending on local guidelines, and may
change at any time, including in response to new or reimposed precautionary
measures as the COVID-19 pandemic evolves. We may incorporate into our ongoing
business operations certain business practice modifications implemented in
response to the COVID-19 pandemic. The impact, if any, of these and any
additional operational changes we may implement is uncertain, but we currently
believe the changes we have implemented have not materially affected, and are
not expected to have a material and adverse effect on, our ability to maintain
financial reporting systems, internal control over financial reporting and
disclosure controls and procedures.

The extent to which the ongoing COVID-19 pandemic, and associated global
economic uncertainty, may impact our business will depend on future
developments, including the duration and spread of the pandemic and the
prevalence and virulence of variants of COVID-19; the scope and effectiveness of
precautionary measures designed to contain and prevent the spread of COVID-19;
the availability and effectiveness of vaccines; and the impact on our current
and prospective customers, employees, and partners; all of which are uncertain
and cannot be predicted at this time. While we have developed and continue to
develop plans to help mitigate the negative impact of the pandemic on our
business, these efforts may not be effective and any protracted economic
downturn may limit the effectiveness of our mitigation efforts. In addition,
even after the immediate impacts of the pandemic on the global economy and our
business subside, the residual effects of the pandemic may present additional
challenges to our business that are currently difficult to predict. We are
continuing to monitor the actual and potential effects of the COVID-19 pandemic
on our business. See Part II, Item 1A, "Risk Factors" for further discussion of
the possible impact of the COVID-19 pandemic on our business.

                       Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including
those described below. While these areas present significant opportunity, they
also present risks that we must manage to achieve successful results. See Part
I, Item 1A, "Risk Factors". If we are unable to address these challenges, our
business and operating results could be adversely affected.

New customer acquisition.  Our long-term success will depend on widespread
adoption of connected planning by enterprises for numerous planning applications
with broad use of those applications within their organizations. While we
believe that we are still in the early stages of penetrating our addressable
market, we have benefited from rapid customer growth.

Customer First strategy.  We put the success of our customers at the center of
our culture, strategy, and investments. We view our Customer First strategy as
core to capturing our connected planning vision and driving the continued
adoption and expansion in the use of our platform. By aligning our thought
leadership, talent ecosystem, worldwide development and delivery capabilities,
customer success management and local sales and service resources, we believe
our Customer First strategy drives exceptional value throughout our customers'
connected planning and digital transformation journeys. Our continued success
depends in part on our ability to continue to put customers at the center of our
strategy.

Expansion of existing customers.  We aim to drive integrated planning across the
entire organization to help our customers benefit from the full value of our
platform. We employ a "land and expand" approach, with many
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of our customers initially deploying our product for a specific planning use
case. Once they realize the benefits and wide applicability of our platform,
many of our customers subsequently renew their subscriptions, expand the number
of users, add new use cases, and expand to additional lines of business,
divisions, and geographies as they continue unlocking the agile enterprise
planning and operating model across functional boundaries. As a result, we are
able to generate a significant increase in revenue from the expanded use of our
platform across the enterprise. Going forward, we are focused on targeting
customers where the opportunity for expansion and need for our planning
solutions are greatest. Our future revenue growth and our ability to achieve and
maintain profitability is dependent upon our ability to maintain existing
customer relationships and to continue to expand our customers' use of our
platform.

Scaling our sales team.  Our ability to achieve significant growth in revenue in
the future will depend, in large part, upon the effectiveness of our sales
leadership and sales efforts, both domestically and internationally. We have
invested and intend to continue to invest in expanding and retaining our sales
leadership and direct sales force, particularly in attracting and retaining
sales personnel with experience selling to complex enterprises. Our ability to
increase our revenue will depend on the new members of our sales force becoming
fully productive and executing expeditiously and effective sales leadership. A
customer's decision to use our platform may be an enterprise-wide decision.
These types of sales require us to provide greater levels of education regarding
the use and benefits of our platform, which involves substantial time, effort,
and costs.

International sales.  Our total revenue generated outside of the United States
during fiscal 2022, 2021, and 2020, was approximately 47%, 46% and 43%,
respectively, of our total revenue. We believe global demand for our platform
will continue to develop as organizations experience the benefits that our
platform can provide to international enterprises with complex planning needs
spanning multiple geographies. Accordingly, we believe there is significant
opportunity to grow our international business. We have invested, and plan to
invest, ahead of this potential demand in personnel, marketing, and access to
data center capacity to support our international growth.

Partner ecosystem.  Our partner ecosystem extends our geographic coverage,
accelerates the usage and adoption of our platform, promotes thought leadership,
and enables more efficient delivery of service solutions. We intend to augment
and deepen our partnerships with strategic and advisory consulting, systems
integration, public cloud, and technology firms. We believe our partners' scale
and route to market can significantly contribute to our ability to penetrate our
addressable market, extend our geographic coverage, and extend usage and
adoption of our platform.

Product velocity.  Our vision is to help customers swiftly and effectively plan,
analyze, and act on initiatives across the enterprise. We have invested and
intend to continue to invest significantly in research and development in an
effort to enhance and expand the functionality of our platform, to attract and
retain development personnel, and to protect our market-leading technology
advantage. We have a well-defined technology roadmap to introduce new features
and functionality to our platform that we believe will improve our ability to
generate revenue by broadening the appeal of our platform to potential new
customers as well as increasing the opportunities for further expanding the use
of our platform by existing customers. We are also investing to further enhance
the functionality, intelligence, user experience, scale, extensibility and
security of our platform. We will need to continue to focus on bringing
cutting-edge technology to market in order to remain competitive.

                      Components of Results of Operations

Revenue


We offer subscriptions to our cloud-based planning platform. We derive our
revenue primarily from subscription fees and, to a lesser degree, from
professional services fees. Subscription revenue consists primarily of fees to
provide our customers access to our cloud-based platform. Professional services
revenue includes fees from assisting customers in implementing and optimizing
the use of our cloud-based platform. These services include implementation,
consulting, and training.

Subscription Revenue


Subscription revenue accounted for 91%, 91% and 88% of our total revenue for
fiscal 2022, 2021, and 2020, respectively. Subscription revenue is driven
primarily by the number of customers, the number of users at each customer, the
price of user subscriptions, and renewal rates.

Subscription fees are recognized ratably as revenue over the contract term
beginning on the date the platform is made available to the customer. Our new
business subscriptions typically have a term of two to three years. We generally
invoice our customers in annual installments at the beginning of each year
within the
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subscription period. Amounts that have been invoiced are initially recorded as deferred revenue and are recognized ratably over the subscription period.


Most of our contracts are non-cancelable over the contract term. We had
remaining performance obligations, or backlog, in the amount of $1,092.5 million
and $817.6 million as of January 31, 2022 and 2021, respectively, consisting of
both billed and unbilled consideration.

Because we recognize revenue from subscription fees ratably over the term of the
contract, changes in our contracting activity in the near term may not impact
our reported revenue until future periods.

Professional Services Revenue


Professional services revenue is generally recognized as the services are
rendered for time and material contracts, or on a proportional performance basis
for fixed price contracts. The substantial majority of our professional service
contracts are on a time and materials basis. Implementations generally take one
to six months to complete depending upon the scope of engagement with the
customer. Our professional services revenue fluctuates from quarter to quarter
as a result of the requirements, complexity, and timing of our customers'
implementation projects.

Cost of Revenue

Cost of Subscription Revenue

Cost of subscription revenue primarily consists of costs related to providing
cloud applications, compensation and other employee-related expenses for data
center staff, including salaries and bonuses, benefits,
and stock-based compensation, payments to outside service providers, customer
service, data center and networking expenses, depreciation expenses, and
amortization of capitalized software development costs.

Cost of Professional Services Revenue


Cost of professional services revenue primarily consists of costs related to
providing implementation and configuration services, optimization services and
training services, personnel-related costs directly associated with our
professional services and training departments, including salaries and bonuses,
benefits, and stock-based compensation, the costs of
contracted third-party vendors, and travel.

Professional services associated with the implementation and configuration of
our subscription platform are performed directly by our services team, as well
as by contracted third-party vendors. When third-party vendors invoice us for
services performed for our customers, those fees are recognized as expense as
incurred.

Operating Expenses

Research and Development

Research and development expenses consist primarily of personnel-related costs
for our development team, including salaries and bonuses, benefits,
stock-based compensation expense, and allocated overhead costs. We have
invested, and intend to continue to invest, in developing technology to support
our growth. We capitalize certain software development costs that are
attributable to developing new features and adding incremental functionality to
our platform, and amortize such costs as costs of subscription revenue over the
estimated life of the new incremental functionality, which is generally two to
three years. We plan to increase our investment in research and development for
the foreseeable future as we focus on further developing our platform and
enhancing its use cases. However, we expect our research and development
expenses to decrease as a percentage of our total revenue over time, although
they may fluctuate as a percentage of our total revenue from period to period.

Sales and Marketing


Sales and marketing expenses consist primarily of personnel-related costs
directly associated with our sales and marketing staff, including salaries and
bonuses, benefits, commissions, and stock-based compensation. Other sales and
marketing costs include promotional events to promote our brand, including our
Anaplan Live! customer experiences, advertising, and allocated overhead costs.
We plan to increase our investment in sales and marketing over the foreseeable
future, primarily stemming from increased headcount in sales and marketing, and
investment in brand- and product-marketing efforts. However, we expect our sales
and marketing expenses to decrease as a percentage of our total revenue over
time, although they may fluctuate as a percentage of our total revenue from
period to period.
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General and Administrative


General and administrative expenses consist primarily of personnel-related costs
associated with our executive, finance, legal, and human resources personnel,
including salaries and bonuses, benefits, and stock-based compensation expense,
professional fees for external legal, accounting and other consulting services,
and allocated overhead costs. We expect to increase the size of our general and
administrative function to support the growth of our business and continue to
incur additional expenses as a result of operating as a public company. As a
result, we expect the dollar amount of our general and administrative expenses
to increase for the foreseeable future. However, we expect our general and
administrative expenses to decrease as a percentage of our total revenue over
time, although they may fluctuate as a percentage of our total revenue from
period to period.

Interest Income (Expense), Net

Interest income (expense), net consists primarily of interest income earned on our cash and cash equivalents, net of interest expense from our finance leases.

Other Income (Expense), Net

Other income (expense), net consists primarily of foreign exchange gains and losses.

Benefit from (Provision for) Income Taxes


Benefit from (Provision for) income taxes consists primarily of income taxes
related to foreign and state jurisdictions in which we conduct business. We
maintain a full valuation allowance on our federal, state, and U.K. deferred tax
assets as we have concluded that it is not more likely than not that the
deferred assets will be utilized.
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                             Results of Operations

The following tables set forth selected consolidated statements of operations data for each of the years indicated:

                                                                      Year Ended January 31,
                                                           2022                2021                2020
                                                                          (In thousands)
Revenue:
Subscription revenue                                   $  536,474          $  408,199          $  307,890
Professional services revenue                              55,702              39,556              40,132
Total revenue                                             592,176             447,755             348,022
Cost of revenue:
Cost of subscription revenue (1)                           99,030              69,802              51,460
Cost of professional services revenue (1)                  57,311              39,177              39,317
Total cost of revenue                                     156,341             108,979              90,777
Gross profit                                              435,835             338,776             257,245
Operating expenses:
Research and development (1)                              153,484             100,523              68,396
Sales and marketing (1)                                   377,352             302,002             250,430
General and administrative (1)                            105,709              90,030              86,852
Total operating expenses                                  636,545             492,555             405,678
Loss from operations                                     (200,710)           (153,779)           (148,433)
Interest income (expense), net                               (493)                167               4,478
Other income (expense), net                                (6,482)              3,736                (809)
Loss before income taxes                                 (207,685)           (149,876)           (144,764)
Benefit from (provision for) income taxes                   4,086              (4,091)             (4,453)
Net loss                                               $ (203,599)         

$ (153,967) $ (149,217)


(1) Includes stock-based compensation expense as
follows:
Cost of subscription revenue                           $    7,712          $    3,822          $    2,547
Cost of professional services revenue                       4,192               2,481               2,199
Research and development                                   35,914              18,715              10,608
Sales and marketing                                        69,590              48,210              34,428
General and administrative                                 32,137              30,398              30,264
Total stock-based compensation expense                 $  149,545          $  103,626          $   80,046


                 Fiscal Year 2022 Compared to Fiscal Year 2021

Revenue

                                      Year Ended January 31,
                                        2022              2021         % Change
                                          (In thousands)
Subscription revenue             $    536,474          $ 408,199           31  %
Professional services revenue          55,702             39,556           41
Total revenue                    $    592,176          $ 447,755           32

Total revenue was $592.2 million in fiscal 2022 compared to $447.8 million in fiscal 2021, an increase of $144.4 million, or 32%.

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Subscription revenue was $536.5 million, or 91% of total revenue, in fiscal
2022, compared to $408.2 million, or 91% of total revenue, in fiscal 2021. The
increase of $128.3 million, or 31%, in subscription revenue was primarily driven
by existing customers expanding their use of our platform, which accounted for
78% of the increase, and acquisition of new customers, which accounted for
approximately 22% of the increase.

Professional services revenue was $55.7 million in fiscal 2022 compared to $39.6
million in fiscal 2021. The increase of $16.1 million, or 41%, in professional
services revenue was primarily driven by sales of our professional services
resulting from the growth of our customer base.

Cost of Revenue

                                               Year Ended January 31,
                                                 2022              2021         % Change
                                                   (In thousands)
Cost of subscription revenue              $     99,030          $  69,802           42  %
Cost of professional services revenue           57,311             39,177           46
Total cost of revenue                     $    156,341          $ 108,979           43

Total cost of revenue was $156.3 million in fiscal 2022 compared to $109.0 million in fiscal 2021, an increase of $47.3 million, or 43%.


Cost of subscription revenue was $99.0 million in fiscal 2022 compared to $69.8
million in fiscal 2021, an increase of $29.2 million, or 42%. The increase in
cost of subscription revenue was primarily due to an increase in salary and
bonuses, and benefits costs of $12.0 million, including stock-based
compensation, an increase in hosting costs of $5.6 million, an increase in
software licenses of $4.6 million, and an increase in amortization of our
equipment leases and capitalized software development costs of $4.4 million.

Cost of professional services revenue was $57.3 million in fiscal 2022 compared
to $39.2 million in fiscal 2021, an increase of $18.1 million, or 46%. The
increase in cost of professional services revenue was primarily due to an
increase in the partner implementation costs related to an increase in partner
activity of $10.7 million, and an increase in salary and bonuses, and benefits
costs of $7.1 million, including stock-based compensation.

Gross Profit and Gross Margin

                                           Year Ended January 31,
                                            2022             2021         % Change
                                               (In thousands)
Subscription gross profit              $   437,444       $ 338,397            29  %
Professional services gross profit          (1,609)            379          

(525)

Total gross profit                     $   435,835       $ 338,776          

29

Subscription gross margin                       82  %           83  %
Professional services gross margin              (3) %            1  %
Total gross margin                              74  %           76  %


Gross profit was $435.8 million in fiscal 2022 compared to $338.8 million in
fiscal 2021, an increase of $97.0 million, or 29%. The increase in gross profit
was the result of the increases in our subscription revenue primarily driven by
existing customers expanding their use of our platform and acquisition of new
customers in fiscal 2022.

Gross margin was 74% in fiscal 2022 compared to 76% in fiscal 2021. The decrease
in gross margin was primarily due to an increase in professional services
revenue, which generates a significantly lower gross margin than our
subscription revenue, as a percentage of total revenue, and higher hosting and
partner implementation costs.

Our gross margins can fluctuate from quarter to quarter as a result of the requirements, complexity, and timing of our customers' implementation projects that can vary significantly.

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Operating Expenses

                                  Year Ended January 31,
                                    2022              2021         % Change
                                      (In thousands)
Operating expense:
Research and development     $    153,484          $ 100,523           53  %
Sales and marketing               377,352            302,002           25
General and administrative        105,709             90,030           17
Total operating expenses     $    636,545          $ 492,555           29


Research and Development

Research and development expenses were $153.5 million in fiscal 2022 compared to
$100.5 million in fiscal 2021, an increase of $53.0 million, or 53%. The
increase includes an increase in salary and bonuses, and benefits costs of $49.4
million (which included an increase in stock-based compensation of $17.2
million) primarily related to an increase in headcount, partially offset by an
increase in capitalized software development costs of $5.7 million.

Sales and Marketing


Sales and marketing expenses were $377.4 million in fiscal 2022 compared to
$302.0 million in fiscal 2021, an increase of $75.4 million, or 25%. The
increase was primarily due to an increase in salary and bonuses and benefits
costs related to an increase in headcount of $65.2 million (which included an
increase in stock-based compensation of $21.4 million and an increase in
commission expenses of $14.1 million), an increase in partner-related fees of
$4.6 million and an increase in consulting expenses of $2.9 million.

General and Administrative


General and administrative expenses were $105.7 million in fiscal 2022 compared
to $90.0 million in fiscal 2021, an increase of $15.7 million, or 17%. The
increase was primarily due to an increase in salary and bonuses, and benefits
costs related to an increase in headcount of $12.8 million, including
stock-based compensation, and an increase in consulting and professional
services of $3.8 million, partially offset by a decrease in allowance for credit
losses of $0.6 million.

Other Income (Expense), Net

                                       Year Ended January 31,
                                          2022               2021        % Change
                                           (In thousands)
Interest income (expense), net   $        (493)            $   167         (395) %
Other income (expense), net      $      (6,482)            $ 3,736         (274)

Interest income (expense), net


Interest income (expense), net decreased by $0.7 million, or 395%, in fiscal
2022. The decrease in interest income (expense), net was primarily due to lower
interest income from our cash and cash equivalents as a result of lower interest
rates in fiscal 2022 compared to fiscal 2021.

Other income (expense), net

Other income (expense), net was an expense of $6.5 million in fiscal 2022 compared to an income of $3.7 million in fiscal 2021, an increase in expense of $10.2 million, or 274%. The change was primarily due to currency fluctuations and the related remeasurements during the fiscal years presented.

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Benefit from (provision for) Income Taxes


                                                   Year Ended January 31,
                                                     2022               

2021 % Change

                                                       (In thousands)
Benefit from (provision for) income taxes    $     4,086             $ 

(4,091) (200) %



The income tax benefit was $4.1 million in fiscal 2022 compared to income tax
expense of $4.1 million in fiscal 2021, an increase in income tax benefit of
$8.2 million, or 200%. The increase in income tax benefit was primarily due to
the release of valuation allowance related to our Israel deferred tax assets and
a reduction in discrete tax expenses, partially offset by an increase in taxable
income generated from intercompany cost-plus arrangements in certain European
and Asian countries.

                        Liquidity and Capital Resources

As of January 31, 2022, our principal sources of liquidity were cash and cash
equivalents totaling $299.4 million, which were held for working capital
purposes and strategic initiatives. Our cash equivalents are comprised primarily
of money market funds and bank deposits.

Our material cash requirements from known contractual and other obligations
consist of our operating and capital leases obligations as well as other
contractual commitments, primarily on data center, cloud and IT operations
related to our daily business operations. As of January 31, 2022, total other
contractual commitments were $208.7 million, with $57.3 million committed within
the next 12 months. See Note 4, "Leases" and Note 8, "Commitments and
Contingencies" of the notes to our Consolidated Financial Statements included in
Part II, Item 8 of this Form 10-K, for more information.

Cash from operations could be affected by various risks and uncertainties,
including but not limited to, the effects of the COVID-19 pandemic and other
risks detailed in Part II, Item 1A, "Risk Factors". We believe our existing cash
and cash equivalents will be sufficient to meet our projected operating
requirements for at least the next 12 months. Our future capital requirements
will depend on many factors, including our pace of growth, subscription renewal
activity, the timing and extent of spend to support research and development
efforts, the expansion of sales and marketing activities, the introduction of
new and enhanced platform offerings, and the continuing market acceptance of the
platform. We may in the future enter into arrangements to acquire or invest in
complementary businesses, services and technologies, and 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.

Loan and Credit Facility Agreements


In April 2020, we entered into the Third Amendment to Credit Agreement and First
Amendment to Collateral Agreement with Wells Fargo as administrative agent and a
lender (the "Third Amendment"). Among other things, the Third Amendment further
amends the Credit Agreement entered into with Wells Fargo in April 2018, as
amended in September 2018 and October 2019 (the "Credit Agreement") in order to:
(1) increase the aggregate revolving credit commitment amount by $20.0 million,
so that we may borrow up to $60.0 million under a secured revolving credit
facility, subject to the terms of the Credit Agreement including the accounts
receivable borrowing base, for general corporate purposes, and (2) extend the
maturity date of the revolving credit facility until April 23, 2022. Also,
pursuant to the Third Amendment, any loans drawn on the credit facility will
incur interest at a rate equal to the highest of (A) the prime rate, (B) the
federal funds rate plus 0.5%, and (C) the one-month LIBOR plus 1%. Interest is
payable monthly in arrears with the principal and any accrued and unpaid
interest due on April 23, 2022. As of January 31, 2022 and 2021, we had not
drawn down any amounts under this agreement.

As part of the Credit Agreement, we granted Wells Fargo a first priority lien in
our accounts receivable, all of the issued shares of capital stock and equity
interests in certain of our subsidiaries, and other corporate assets and agreed
not to pledge our intellectual property to other parties. The Credit Agreement,
as amended by the Third Amendment, includes affirmative and negative covenants,
including financial covenants requiring the maintenance of: (1) minimum tangible
net worth (defined as assets, excluding intangible assets, less liabilities) as
of the last day of any fiscal quarter of not less than $150.0 million for any
fiscal quarter ending on or prior to January 31, 2021 and $125.0 million for any
fiscal quarter ending thereafter, and (2) minimum billings for the most recent
twelve months ending as of the last day of any fiscal quarter of not less than
$350.0 million. As of January 31, 2022, we were in compliance with the financial
covenants contained in the Credit Agreement.
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Cash Flows

The following table summarizes our cash flows for the periods presented:


                                                     Year Ended January 31,
                                               2022           2021          

2020

                                                         (In thousands)
Net cash used in operating activities       $ (15,083)     $  (4,631)     $ (14,405)
Net cash used in investing activities       $ (24,113)     $ (15,743)     $ (48,506)
Net cash provided by financing activities   $  23,328      $  27,832      $  46,506


Operating Activities

Net cash used in operating activities of $15.1 million for fiscal 2022,
reflecting a net loss of $203.6 million and non-cash release of deferred tax
valuation allowance of $7.6 million, adjusted by non-cash charges for
stock-based compensation of $149.5 million, amortization of deferred commissions
of $42.6 million, depreciation and amortization of $28.5 million, amortization
of operating lease right-of-use assets and accretion of operating lease
liabilities of $10.1 million, non-cash foreign currency remeasurement losses of
$4.9 million and other non-cash items of $1.3 million. Changes in working
capital were unfavorable to cash flows from operations by $40.8 million
primarily due to an increase in deferred commissions of $85.7 million related to
commissions capitalized on our sales, an increase in accounts receivable of
$51.9 million primarily due to increased customer billings, net payments for
operating lease liabilities of $9.6 million and an increase in prepaid expenses
and other current assets of $8.8 million, partially offset by an increase in
deferred revenue balance of $90.7 million due to increased customer billings and
an increase in accounts payable and accrued expenses of $25.1 million due to
timing of payments.

Net cash used in operating activities of $4.6 million for fiscal 2021, was
primarily due to a net loss of $154.0 million and non-cash foreign currency
remeasurement gains of $4.2 million, partially offset by non-cash charges for
stock-based compensation of $103.6 million, amortization of deferred commissions
of $33.4 million, depreciation and amortization of $25.8 million, reduction of
operating lease right-of-use assets and accretion of operating lease liabilities
$10.1 million, and other non-cash items of $3.1 million. Changes in working
capital were unfavorable to cash flows from operations by $22.5 million
primarily due to an increase in deferred commissions of $65.6 million related to
commissions capitalized on our sales, an increase in accounts receivable of
$39.9 million primarily due to increased customer billings, net payments for
operating lease liabilities of $9.3 million, and an increase in prepaid expenses
and other current assets of $6.1 million, partially offset by an increase in
deferred revenue balance of $71.8 million due to increased customer billings, an
increase in accounts payable and accrued expenses of $21.2 million due to our
growth and timing of payments, and an increase in other noncurrent liabilities
of $6.6 million.

Investing Activities

Net cash used in investing activities for fiscal 2022 of $24.1 million was
related to the capitalization of internal-use software of $13.7 million as we
expanded our platform and increased our development efforts, and purchases of
property and equipment of $10.4 million related to our growth.

Net cash used in investing activities for fiscal 2021 of $15.7 million was
related to the capitalization of internal-use software of $10.1 million as we
expanded our platform and increased our development efforts, and purchases of
property and equipment of $5.7 million related to our growth.

Financing Activities


Net cash provided by financing activities for fiscal 2022 of $23.3 million
consisted primarily of $19.7 million in proceeds from employee stock purchase
plan and $13.4 million in proceeds from the exercise of stock options, partially
offset by $9.8 million principal payment on finance lease obligations.

Net cash provided by financing activities for fiscal 2021 of $27.8 million consisted primarily of $18.8 million in proceeds from the exercise of stock options and $17.7 million in proceeds from employee stock purchase plan, partially offset by $8.7 million principal payment on finance lease obligations.

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                   Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with U.S.
GAAP. The preparation of these consolidated financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosures. We base our
estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances. We evaluate our estimates and
assumptions on an ongoing basis. Actual results may differ from these estimates.
To the extent that there are material differences between these estimates and
our actual results, our future financial statements will be affected.

Revenue Recognition


We recognize revenue from contracts with customers using the five-step method
described in Note 1 of the notes to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K. At contract inception we
evaluate whether two or more contracts should be combined and accounted for as a
single contract and whether the combined or single contract includes more than
one performance obligation. We combine contracts entered into at or near the
same time with the same customer if we determine that the contracts are
negotiated as a package with a single commercial objective; the amount of
consideration to be paid in one contract depends on the price or performance of
the other contract; or the services promised in the contracts are a single
performance obligation.

Our performance obligations consist of (i) subscription and support services and
(ii) professional and other services. Contracts that contain multiple
performance obligations require an allocation of the transaction price to each
performance obligation based on their relative standalone selling price. We
determine standalone selling price, or SSP, for all our performance obligations
using observable inputs, such as standalone sales and historical contract
pricing. SSP is consistent with our overall pricing objectives, taking into
consideration the type of subscription services and professional and other
services. SSP also reflects the amount we would charge for that performance
obligation if it were sold separately in a standalone sale, and the price we
would sell to similar customers in similar circumstances.

In general, we satisfy the majority of our performance obligations over time as
we transfer the promised services to our customers. We review the contract terms
and conditions to evaluate the timing and amount of revenue recognition; the
related contract balances; our remaining performance obligations; and current
remaining performance obligations. We also estimate the number of hours expected
to be incurred based on an expected hours approach that considers historical
hours incurred for similar projects based on the types and sizes of customers.
These evaluations require judgment that could affect the timing and amount of
revenue recognized.

Deferred Commissions

We capitalize sales commissions that are considered to be incremental to the
acquisition of customer contracts, which are then amortized over an estimated
period of benefit. To determine the period of benefit of our deferred
commissions, we evaluate the type of costs incurred, the nature of the related
benefit, and the specific facts and circumstances of our arrangements. We
determine the period of benefit for commissions paid for the acquisition of the
initial subscription contract by taking into consideration
our historical initial and renewal contractual terms and estimated renewal
rates. We determine the period of benefit for commissions on renewal
subscription contracts by considering the average contractual term for renewal
contracts. We evaluate these assumptions at least annually and periodically
review whether events or changes in circumstances have occurred that could
impact the period of benefit.

                        Recent Accounting Pronouncements

See "Summary of Business and Significant Accounting Policies" in Note 1 of the
notes to our consolidated financial statements included in Part II, Item 8 of
this Annual Report on Form 10-K.

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