SMARTSHEET INC. The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year endedJanuary 31, 2022 . This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue," and similar expressions or variations. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including but not limited to those discussed in the section titled "Risk Factors" and in other parts of this Quarterly Report on Form 10-Q. Our fiscal year endsJanuary 31 . OverviewSmartsheet is the enterprise platform for dynamic work. We empower anyone to drive meaningful change. Our leading cloud-based platform enables teams and organizations to plan, capture, manage, automate, and report on work at scale, resulting in more efficient processes and better business outcomes. We were founded in 2005 with a vision to build a universal application for work management that does not require coding capabilities. Unstructured or dynamic work is work that has historically been managed using a combination of email, spreadsheets, whiteboards, phone calls, and in-person meetings to communicate with team members and complete projects and processes. It is frequently changing, often ad-hoc, and highly reactive to new information. Our platform helps manage this kind of unstructured work and serves as a single source of truth across work processes, fostering accountability and engagement within teams, leading to more efficient decision-making and better business outcomes. We generate revenue primarily from the sale of subscriptions to our cloud-based platform. For subscriptions, customers select the plan that meets their needs and can begin usingSmartsheet within minutes. We offer three subscription levels to new customers: Pro, Business, and Enterprise, the pricing for which varies by the capabilities provided. Customers can also purchaseSmartsheet Advance, which provides components that, in combination, enable customers to implement solutions for a specific use case or for large scale projects, initiatives, or processes. Some components are available for standalone purchase, including Connectors, which provide data integration and automation to third-party applications, and premium applications such as Dynamic View, Data Shuttle, Control Center, and Bridge. Additional subscriptions that can be integrated with our cloud-based platform includeResource Management , a resource planning solution that helps businesses find and schedule appropriate project teams, track and manage time, and forecast hiring needs; and Brandfolder, a digital asset management platform that enables workers to intuitively store, customize, and share creative assets. Professional services are offered to help customers create and administer solutions for specific use cases and for training purposes. Customers can begin using our platform by purchasing a subscription directly from our website or through our sales force, starting a free trial, or working as a collaborator on a project. 21
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Impact of COVID-19
The novel coronavirus disease ("COVID-19") continues to impact the global
economy. The extent to which COVID-19 may impact our financial conditions or
result of operations in future periods remains uncertain. However, the
transition to a digital-first world has emphasized the importance of cloud-based
work management solutions such as our own, and the need to reimagine the way
employees engage with each other and customers. We continue to prioritize the
health and safety of our employees, customers, and community. As of April 30,
2022 , our offices have remained open in accordance with applicable regional
guidance and remote work options are available to the majority of our employees.
We continue to host many employee and customer activities and events virtually,
and, where it is safe to do so, we have resumed some in-person activities and
events. As health and safety conditions allow, we expect to increase in-person
activities and events in fiscal year 2023, which will increase marketing and
travel costs from prior year levels. We will continue to actively monitor the
COVID-19 situation and may take further actions that alter our business
operations, as may be required by federal, state, or local authorities, or that
we determine are in the best interests of our employees, customers, partners,
suppliers, and shareholders. Refer to Part II, Item 1A, Risk Factors for further
discussion of the impact and possible future impacts of the COVID-19 pandemic on
our business.
Key Business Metrics
We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
2022 2021
Average annualized contract value per domain-based customer
133 % 125 %
Customers with annualized contract values ("ACV") of
1,108 661
Customers with ACV of $50 thousand or more 2,516 1,674
Customers with ACV of $5 thousand or more 15,879 12,655
Average ACV per domain-based customer
We use average annualized contract value ("ACV") per domain-based customer to
measure customer commitment to our platform and sales force productivity. We
define average ACV per domain-based customer as total outstanding ACV for
domain-based subscriptions as of the end of the reporting period divided by the
number of domain-based customers as of the same date. We define domain-based
customers as organizations with a unique email domain name.
Dollar-based net retention rate
We calculate dollar-based net retention rate as of a period end by starting with
the ACV from the cohort of all customers as of the 12 months prior to such
period end ("Prior Period ACV"). We then calculate the ACV from these same
customers as of the current period end ("Current Period ACV"). Current Period
ACV includes any upsells and is net of contraction or attrition over the
trailing 12 months, but excludes subscription revenue from new customers in the
current period. We then divide the total Current Period ACV by the total Prior
Period ACV to arrive at the dollar-based net retention rate. Any ACV obtained
through merger and acquisition transactions does not affect the dollar-based net
retention rate until one year from the date on which the transaction closed.
The dollar-based net retention rate is used by us to evaluate the long-term value of our customer relationships and is driven by our ability to retain and expand the subscription revenue generated from our existing customers.
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Components of Results of Operations
Revenue
Subscription revenue
Subscription revenue primarily consists of fees from customers for access to our cloud-based platform. We recognize subscription revenue ratably over the subscription contract term beginning on the date access to our platform is provided, as no implementation work is required, assuming all other revenue recognition criteria have been met.
Professional services revenue
Professional services revenue primarily includes fees for consulting and training services. Our consulting services typically consist of platform configuration and use case optimization, and are primarily invoiced on a time and materials basis, with some smaller engagements being provided for a fixed fee. We recognize revenue for our consulting services as those services are delivered. Our training services are delivered either remotely or at the customer site. Training services are charged for on a fixed-fee basis and we recognize revenue as the training program is delivered. Our consulting and training services are generally considered to be distinct, for accounting purposes, and we recognize revenue as services are performed or upon completion of work.
Cost of revenue and gross margin
Cost of subscription revenue
Cost of subscription revenue primarily consists of expenses related to hosting our services and providing support, including employee-related costs such as salaries, wages, and related benefits, third-party hosting fees, amortization of capitalized software, software-related costs, amortization of acquisition-related intangibles, payment processing fees, costs of outside services to supplement our internal teams, allocated overhead, costs of Connectors betweenSmartsheet and third-party applications, and costs related to technical support services.
Cost of professional services revenue
Cost of professional services revenue consists primarily of employee-related costs for our consulting and training teams, costs of outside services to supplement our internal teams, allocated overhead, software-related costs, travel-related expenses, and billable expenses.
Gross margin
Gross margin is calculated as gross profit expressed as a percentage of total revenue. Our gross margin may fluctuate from period to period as our revenue mix fluctuates, and as a result of the timing and amount of investments to expand our hosting capacity, our continued building of application support and professional services teams, and increased share-based compensation expense. While we continue to build our technology to expand to newer markets and geographies, we expect our gross margin to decline moderately.
Operating expenses
Research and development
Research and development expenses consist primarily of employee-related costs,
software-related costs, costs of outside services used to supplement our
internal staff, and allocated overhead. We consider continued investment in our
development talent and our platform to be important for our growth. We expect
our research and development expenses to increase in absolute dollars as our
business grows and to gradually decrease over the long-term as a percentage of
total revenue due to economies of scale.
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Sales and marketing
Sales and marketing expenses consist primarily of employee-related costs, brand awareness and demand generation costs, allocated overhead, travel-related expenses, costs of outside services used to supplement our internal staff, software-related costs, amortization of acquisition-related intangibles, and amortization of capitalized software. Commissions earned by our sales force that are incremental to each customer contract, along with related fringe benefits and taxes, are capitalized and amortized over an estimated useful life of three years. We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in employee-related costs, brand awareness, and demand generation costs. We expect sales and marketing costs to gradually decrease as a percentage of total revenue over the long-term due to economies of scale. General and administrative General and administrative expenses consist primarily of employee-related costs for accounting, finance, legal, IT, and human resources personnel. In addition, general and administrative expenses include costs of outside services to supplement our internal staff, software-related costs, allocated overhead, certain tax, license, and insurance-related expenses, non-personnel costs, such as accounting and legal costs, bank charges, and bad debt expense. We expect our general and administrative expenses to increase in absolute dollars as our business grows, and to gradually decrease over the long-term as a percentage of total revenue due to economies of scale.
Interest income
Interest income consists of interest income from our investment holdings.
Other income (expense), net
Other income (expense), net consists of foreign exchange gains and losses, interest expense, and other non-operating income and expenses.
Income tax provision (benefit)
Income tax provision (benefit) consists primarily of income taxes in foreign jurisdictions and state income taxes. We maintain a valuation allowance on ourU.S. federal, state, and certain foreign deferred tax assets as we have concluded that it is not more likely than not that the deferred assets will be realized. 24
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Results of Operations
The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods:
Three Months Ended April 30,
2022 2021
(in thousands)
Revenue
Subscription $ 155,276 $ 108,013
Professional services 13,034 9,069
Total revenue 168,310 117,082
Cost of revenue
Subscription(1) 25,138 18,563
Professional services(1) 12,020 8,009
Total cost of revenue 37,158 26,572
Gross profit 131,152 90,510
Operating expenses
Research and development(1) 52,519 36,474
Sales and marketing(1) 115,391 71,379
General and administrative(1) 33,044 21,018
Total operating expenses 200,954 128,871
Loss from operations (69,802) (38,361)
Interest income 388 11
Other income (expense), net (828) 1,327
Loss before income tax provision (70,242) (37,023)
Income tax provision 215 49
Net loss $ (70,457) $ (37,072)
(1) Amounts include share-based compensation expense as follows:
Three Months Ended April 30,
2022 2021
(in thousands)
Cost of subscription revenue $ 2,611 $ 1,495
Cost of professional services revenue 1,477 673
Research and development 15,615 8,307
Sales and marketing 14,745 8,656
General and administrative 9,452 4,728
Total share-based compensation expense $ 43,900 $ 23,859
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Three Months Ended April 30,
2022 2021
Revenue
Subscription 92 % 92 %
Professional services 8 8
Total revenue 100 100
Cost of revenue
Subscription 15 16
Professional services 7 7
Total cost of revenue 22 23
Gross profit 78 77
Operating expenses
Research and development 31 31
Sales and marketing 69 61
General and administrative 20 18
Total operating expenses 119 110
Loss from operations (41) (33)
Interest income - -
Other income (expense), net - 1
Loss before income tax provision (42) (32)
Income tax provision - -
Net loss (42) % (32) %
Note: Certain amounts may not sum due to rounding.
Comparison of the three months ended
Revenue
Three Months Ended April 30, Change
2022 2021 Amount %
(dollars in thousands)
Revenue
Subscription $ 155,276 $ 108,013 $ 47,263 44 %
Professional services 13,034 9,069 3,965 44 %
Total revenue $ 168,310 $ 117,082 $ 51,228 44 %
Percentage of total revenue
Subscription revenue 92 % 92 %
Professional services revenue 8 % 8 %
During the three months ended April 30, 2022 , as compared to the three months
ended April 30, 2021 , total subscription revenue increased by $47.3 million , or
44%. The increase in revenue between periods was driven by an increase in sales
of user-based subscription plans, which contributed $27.9 million of the
increase, followed by an increase in sales of pre-configured capabilities, which
contributed $19.4 million of the increase.
The increase in professional services revenue was primarily driven by an increase in demand for our consulting and training services.
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Cost of revenue, gross profit, and gross margin
Three Months Ended April 30, Change
2022 2021 Amount %
(dollars in thousands)
Cost of revenue
Subscription $ 25,138 $ 18,563 $ 6,575 35 %
Professional services 12,020 8,009 4,011 50 %
Total cost of revenue $ 37,158 $ 26,572 $ 10,586 40 %
Gross profit $ 131,152 $ 90,510 $ 40,642 45 %
Gross margin
Subscription 84 % 83 %
Professional services 8 % 12 %
Total gross margin 78 % 77 %
Cost of subscription revenue increased $6.6 million , or 35%, for the three
months ended April 30, 2022 compared to the three months ended April 30, 2021 .
The increase was primarily due to an increase of $3.4 million in
employee-related expenses due to increased headcount, of which $1.2 million was
related to share-based compensation expense, an increase of $1.9 million in
hosting fees, an increase of $0.9 million in amortization of capitalized
software, an increase of $0.4 million in software-related costs, and an increase
of $0.2 million in credit card processing fees. This was partially offset by a
decrease of $0.2 million in costs of outside services to supplement our internal
staff.
Our gross margin for subscription revenue was 84% and 83% for the three months
ended April 30, 2022 and 2021, respectively. The increase in gross margin during
the three months ended April 30, 2022 was driven primarily by decreases in costs
of outside services to supplement our internal staff and costs of Connectors
with third-party applications, and an increase in subscription revenue that
outpaced the related increase in credit card fees.
Cost of professional services increased $4.0 million , or 50%, for the three
months ended April 30, 2022 compared to the three months ended April 30, 2021 .
The increase was primarily due to an increase of $2.9 million in
employee-related expenses, of which $0.8 million was related to share-based
compensation expense, an increase of $1.0 million in costs of outside services
to supplement our internal staff, and an increase of $0.1 million in
travel-related costs.
Our gross margin for professional services was 8% and 12% for the three months
ended April 30, 2022 and 2021, respectively. The decrease in gross margin during
the three months ended April 30, 2022 was driven primarily by an increase in
personnel expenses that outpaced the related increase in professional services
revenue and increased utilization of third-party service providers to supplement
our internal staff in delivering revenue-generating consulting arrangements.
Research and development expenses
Three Months Ended April 30, Change
2022 2021 Amount %
(dollars in thousands)
Research and development $ 52,519 $ 36,474 $ 16,045 44 %
Percentage of total revenue 31 % 31 %
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Research and development expenses increased$16.0 million , or 44%, for the three months endedApril 30, 2022 compared to the three months endedApril 30, 2021 . The increase was primarily due to an increase of$13.2 million in employee-related expenses due to increased headcount, of which$7.2 million was related to share-based compensation expense, an increase of$1.7 million in software-related costs, and an increase of$1.2 million in costs of outside services to supplement our internal staff. This was partially offset by a decrease of$0.2 million in allocated overhead.
Sales and marketing expenses
Three Months Ended April 30, Change
2022 2021 Amount %
(dollars in thousands)
Sales and marketing $ 115,391 $ 71,379 $ 44,012 62 %
Percentage of total revenue 69 % 61 %
Sales and marketing expenses increased $44.0 million , or 62%, for the three
months ended April 30, 2022 compared to the three months ended April 30, 2021 .
The increase was primarily due to an increase of $25.9 million in
employee-related expenses due to increased headcount, of which $6.1 million
related to share-based compensation expense, an increase of $11.7 million in
brand awareness and demand generation costs, an increase of $2.7 million in
travel-related costs, an increase of $2.2 million in costs of outside services
used to supplement our internal staff, an increase of $1.2 million in
software-related costs, and an increase of $0.4 allocated overhead costs. This
was partially offset by a decrease of $0.1 million in amortization of
capitalized software.
General and administrative expenses
Three Months Ended April 30, Change
2022 2021 Amount %
(dollars in thousands)
General and administrative $ 33,044 $ 21,018 $ 12,026 57 %
Percentage of total revenue 20 % 18 %
General and administrative expenses increased $12.0 million , or 57%, for the
three months ended April 30, 2022 compared to the three months ended April 30,
2021 . This was driven by an increase of $10.0 million in employee-related
expenses due to increased headcount, of which $4.7 million related to
share-based compensation expense, an increase of $0.6 million in
software-related costs, an increase of $0.5 million in legal costs, an increase
of $0.5 million in costs related to taxes, licenses, and insurance, an increase
of $0.3 million in costs of outside services to supplement our internal staff,
an increase of $0.2 million in travel-related costs, an increase of $0.2 million
in allocated overhead costs, and an increase of $0.2 million in accounting,
internal control, and tax related costs. This was partially offset by a decrease
of $0.6 million in bad debt expense.
Other income (expense), net
Three Months Ended April 30, Change
2022 2021 Amount %
(dollars in thousands)
Other income (expense), net $ (828) $ 1,327 $ (2,155) *N/M
Percentage of total revenue - % 1 %
*N/M = Not meaningful
For the three months ended April 30, 2022 compared to the three months ended
April 30, 2021 , the change in other income (expense), net was driven by a net
increase of $1.1 million in other expense primarily due to a $0.9 million
increase in unrealized foreign currency loss. Additionally, there was a decrease
in other income of $1.1 million primarily driven by an acquisition-related gain
contingency which was resolved in the comparative period.
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Non-GAAP Financial Measures
In addition to our results determined in accordance with generally accepted accounting principles inthe United States ("GAAP"), we believe the following non-GAAP financial measures are useful in evaluating our operating performance. We use the below referenced non-GAAP financial measures, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial measures, when taken collectively, may be helpful to investors because they provide consistency and comparability with past financial performance, and assist in comparisons with other companies, some of which use similar non-GAAP financial measures to supplement their GAAP results. The non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial measures presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Limitations of non-GAAP financial measures
Our non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. First, free cash flow and calculated billings are not substitutes for net cash used in operating activities and total revenue, respectively. Similarly, non-GAAP gross profit and non-GAAP operating loss are not substitutes for gross profit and operating loss, respectively. Second, other companies may calculate similar non-GAAP financial measures differently or may use other measures as tools for comparison. Additionally, the utility of free cash flow as a measure of our financial performance and liquidity is further limited as it does not represent the total increase or decrease in our cash balance for a given period. Furthermore, as calculated billings are affected by a combination of factors, including the timing of sales, the mix of monthly and annual subscriptions sold, and the relative duration of subscriptions sold, and each of these elements has unique characteristics in the relationship between calculated billings and total revenue, our calculated billings activity is not closely correlated to revenue except over longer periods of time.
Non-GAAP gross profit and non-GAAP gross margin
We define non-GAAP gross profit as gross profit adjusted for share-based compensation expense, amortization of acquisition-related intangible assets, and one-time acquisition costs. Non-GAAP gross margin represents non-GAAP gross profit as a percentage of total revenue.
Three Months Ended April 30,
2022 2021
(dollars in thousands)
Gross profit $ 131,152 $ 90,510
Add:
Share-based compensation expense(1) 4,393 2,168
Amortization of acquisition-related intangible assets(2) 1,270 1,270
Non-GAAP gross profit $ 136,815 $ 93,948
Gross margin 78 % 77 %
Non-GAAP gross margin 81 % 80 %
(1) Includes amortization related to share-based compensation that was capitalized in internal-use
software and other assets in previous periods.
(2) Consists entirely of amortization of intangible assets that were recorded as part of purchase
accounting and contribute to revenue generation. The amortization of intangible assets related to
acquisitions will recur in future periods until such intangible assets have been fully amortized.
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Non-GAAP operating loss and non-GAAP operating margin
We define non-GAAP operating loss as loss from operations adjusted for
share-based compensation expense, amortization of acquisition-related intangible
assets, one-time acquisition costs, and litigation expenses and settlements
related to matters that are outside the ordinary course of business. Non-GAAP
operating margin represents non-GAAP operating loss as a percentage of total
revenue.
Three Months Ended April 30,
2022 2021
(dollars in thousands)
Loss from operations $ (69,802) $ (38,361)
Add:
Share-based compensation expense(1) 44,228 23,859
Amortization of acquisition-related intangible assets(2) 2,483 2,517
One-time acquisition costs - 17
Non-GAAP operating loss $ (23,091) $ (11,968)
Operating margin (41) % (33) %
Non-GAAP operating margin (14) % (10) %
(1) Includes amortization related to share-based compensation that was capitalized in internal-use software and
other assets in previous periods.
(2) Consists entirely of amortization of intangible assets that were recorded as part of purchase accounting and
contribute to revenue generation. The amortization of intangible assets related to acquisitions will recur in
future periods until such intangible assets have been fully amortized.
Non-GAAP net loss
We define non-GAAP net loss as net loss adjusted for share-based compensation
expense, amortization of acquisition-related intangible assets, one-time
acquisition costs, litigation expenses and settlements related to matters that
are outside the ordinary course of our business, and non-recurring income tax
adjustments associated with mergers and acquisitions.
Three Months Ended April 30,
2022 2021
(in thousands)
Net loss $ (70,457) $ (37,072)
Add:
Share-based compensation expense(1) 44,228 23,859
Amortization of acquisition-related intangible assets(2) 2,483 2,517
One-time acquisition costs - 17
Non-GAAP net loss $ (23,746) $ (10,679)
(1) Includes amortization related to share-based compensation that was capitalized in internal-use
software and other assets in previous periods.
(2) Consists entirely of amortization of intangible assets that were recorded as part of purchase
accounting and contribute to revenue generation. The amortization of intangible assets related to
acquisitions will recur in future periods until such intangible assets have been fully amortized.
Free cash flow
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We define free cash flow as net cash provided by (used in) operating activities
less cash used for purchases of property and equipment and capitalized
internal-use software. We believe free cash flow facilitates period-to-period
comparisons of liquidity. We consider free cash flow to be a key performance
metric because it measures the amount of cash we generate from our operations
after our capital expenditures. We use free cash flow in conjunction with
traditional GAAP measures as part of our overall assessment of our liquidity,
including the preparation of our annual operating budget and quarterly
forecasts, to evaluate the effectiveness of our business strategies, and to
communicate with our board of directors concerning our liquidity.
Three Months Ended April 30,
2022 2021
(in thousands)
Net cash used in operating activities $ (5,053) $ (2,961)
Less:
Purchases of property and equipment (1,691) (3,220)
Capitalized internal-use software development costs (2,323) (2,017)
Free cash flow $ (9,067) $ (8,198) Calculated billings
We define calculated billings as total revenue plus the change in deferred revenue in the period. Because we recognize subscription revenue ratably over the subscription term, calculated billings can be used to measure our subscription sales activity for a particular period, to compare subscription sales activity across particular periods, and as an indicator of future subscription revenue. Because we generate most of our revenue from customers who are invoiced on an annual basis, and because we have a wide range of customers, from those who pay us less than$200 per year to those who pay us more than$3.5 million per year, we experience seasonality and variability that is tied to typical enterprise buying patterns and contract renewal dates of our largest customers. We expect that our billings trends will continue to vary in future periods based on the timing and size of new and renewal bookings, changes to the economic environment, and other factors. Three Months Ended April 30, 2022 2021 (in thousands) Total revenue$ 168,310 $ 117,082 Add: Deferred revenue (end of period) 346,423
239,667
Less:
Deferred revenue (beginning of period) 334,662 223,997 Calculated billings$ 180,071 $ 132,752
Liquidity and Capital Resources
As ofApril 30, 2022 , our principal sources of liquidity were cash and cash equivalents totaling$239.7 million and short-term investments totaling$207.0 million , which were held for working capital and general corporate purposes. Our cash equivalents and short-term investments are comprised of money market funds,U.S. Treasury securities, corporate bonds, and commercial paper. We have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and our condensed consolidated statements of cash flows. We expect to continue to incur operating losses and may incur negative cash flows from operations for the foreseeable future. 31
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We finance our operations primarily through payments received from customers for
subscriptions and professional services and net proceeds received through sales
of equity securities, option exercises, and contributions from our 2018 Employee
Stock Purchase Plan ("ESPP").
A significant majority of our customers pay in advance for annual subscriptions.
Therefore, a substantial source of our cash is from our deferred revenue, which
is included on our condensed consolidated balance sheets as a liability.
Deferred revenue consists of customer billings and payments in advance of
revenue being recognized from the Company's contracts. As of April 30, 2022 , we
had deferred revenue of $346.4 million , of which $344.7 million was recorded as
a current liability and was expected to be recognized as revenue in the
subsequent 12 months, provided all recognition criteria are met.
Our material cash requirements from known contractual and other obligations consist of the following:
Leases
We have non-cancelable operating leases that expire at various dates through 2029. As ofApril 30, 2022 , we had fixed minimum lease payments of$85.7 million , of which$19.7 million is due in the next twelve months. Refer to Note 11, Leases, to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q for additional information on our operating leases.
Other contractual obligations
In the ordinary course of business we enter into contracts with vendors for goods and services, some of which are non-cancelable. As ofApril 30, 2022 , we had contractual obligations of$159.6 million , of which$41.1 million is due in the next twelve months. These contractual obligations primarily consist of purchase commitments with our cloud-based hosting service providers. See Note 13, Commitments and Contingencies, to the consolidated financial statements contained within our Annual Report on Form 10-K for additional information on our commitments with our cloud-based hosting service providers. We believe our existing cash, cash equivalents, and cash provided by sales of our products and services will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the introduction of new and enhanced product offerings, the continued market adoption of our product, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, and employee-related expenditures from expansion of our headcount. 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 order to meet these future capital requirements. 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 or generate cash flows necessary to expand our operations and invest in new technologies, our ability to compete successfully could be reduced, and this could harm our results of operations. 32
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Cash flows
The following table summarizes our cash flows for the periods indicated (in
thousands):
Three Months Ended April 30,
2022 2021
Net cash used in operating activities $ (5,053) $ (2,961)
Net cash used in investing activities (210,572) (5,237)
Net cash provided by financing activities 6,808 5,327
Effects of changes in foreign currency exchange rates on cash, cash equivalents, and restricted cash
(821) 447
Net decrease in cash, cash equivalents, and restricted cash
Operating activities
Our largest sources of operating cash are cash collections from our customers for sales of subscriptions and professional services. Our primary uses of cash from operating activities are for employee-related expenditures and sales and marketing expenses. Historically, we have generated negative cash flows from operating activities during most fiscal years, and have supplemented working capital requirements through net proceeds from the sale of equity securities. During the three months endedApril 30, 2022 , net cash used in operating activities was$5.1 million , driven by our net loss of$70.5 million , adjusted for non-cash charges of$67.5 million , and net cash outflows of$2.1 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of share-based compensation, amortization of deferred commission costs, depreciation and amortization, and non-cash operating lease costs. Fluctuations in operating assets and liabilities included a decrease in accounts receivable of$31.5 million , an increase in deferred commissions of$15.9 million , an increase in prepaid expenses and other current assets of$13.1 million , a decrease in accounts payable and accrued expenses of$12.5 million , an increase in deferred revenue of$11.8 million , and a decrease in operating lease liabilities of$3.9 million . During the three months endedApril 30, 2021 , net cash used in operating activities was$3.0 million , driven by our net loss of$37.1 million , adjusted for non-cash charges of$40.9 million , and net cash outflows of$6.8 million due to changes in our operating assets and liabilities. Non-cash charges primarily consisted of share-based compensation, amortization of deferred commission costs, non-cash operating lease costs, amortization of intangible assets, and depreciation of property and equipment. Fluctuations in operating assets and liabilities included an increase in deferred revenue of$15.7 million , an increase in deferred commissions of$15.3 million , a decrease in accounts payable and accrued expenses of$14.0 million , a decrease in accounts receivable of$13.4 million , an increase in prepaid expenses and other current assets of$3.6 million , a decrease in operating lease liabilities of$3.0 million , and a decrease in other long-term assets of$0.2 million .
Investing activities
Net cash used in investing activities during the three months endedApril 30, 2022 of$210.6 million consisted of purchases of short-term investments of$207.3 million , spend on capitalized internal-use software development of$2.3 million , purchases of property and equipment of$1.7 million , proceeds from the liquidation of an investment of$0.6 million , and proceeds from the sale of property equipment of$0.1 million . Net cash used in investing activities during the three months endedApril 30, 2021 of$5.2 million consisted of purchases of property and equipment of$3.2 million and spend on capitalized internal-use software development of$2.0 million . 33
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Financing activities
Net cash provided by financing activities during the three months endedApril 30, 2022 of$6.8 million was primarily due to$6.8 million in proceeds from our ESPP and$1.4 million in proceeds from the exercise of stock options. These proceeds were partially offset by taxes paid related to net share settlement of restricted stock units of$1.4 million . Net cash provided by financing activities during the three months endedApril 30, 2021 of$5.3 million was primarily due to$4.7 million in proceeds from our ESPP and$3.4 million in proceeds from the exercise of stock options. These proceeds were partially offset by taxes paid related to net share settlement of restricted stock units of$2.8 million .
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. There are no indemnification claims that we are aware of at this time that could have a material adverse effect on our condensed consolidated financial statements.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates. The Company's significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in our Annual Report on Form 10-K for the year endedJanuary 31, 2022 . There have been no significant changes to these policies during the three months endedApril 30, 2022 except as described in Note 2, Summary of Significant Accounting Policies, in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
For further information on recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies, in the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
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