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MarketScreener Homepage  >  Equities  >  Nyse  >  Yext, Inc.    YEXT

YEXT, INC.

(YEXT)
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YEXT : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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09/04/2020 | 05:25pm EDT
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year
ended January 31, 2020, filed with the SEC on March 20, 2020. As discussed in
the section titled "Special Note Regarding Forward Looking Statements," the
following discussion and analysis contains forward looking statements that
involve risks and uncertainties, including uncertainty resulting from the
ongoing COVID-19 pandemic, as well as assumptions that, if they never
materialize or prove incorrect, could cause our results to differ materially
from those expressed or implied by such forward looking statements. Factors that
could cause or contribute to these differences include, but are not limited to,
those discussed in the section titled "Risk Factors" under Part II, Item 1A in
this Quarterly Report on Form 10-Q.
Overview
Yext, a search experience cloud company, puts businesses in control of their
facts online by delivering their official answers. Our platform lets businesses
structure the facts about their brands in a database called a Knowledge Graph.
Our platform is built to leverage the structured data stored in the Knowledge
Graph to power direct answers on a business's own website, as well as across
more than 175 service and application providers, which we refer to as our
Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana,
Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. The Yext
platform powers all of our key features, including Listings, Pages, and Answers,
along with its other features and capabilities.
We sell our platform throughout the world and intend to continue to expand our
international sales efforts. We sell to customers of all sizes, through direct
sales efforts to our customers, including third-party reseller customers. In
transactions with resellers, we are only party to the transaction with the
reseller and are not a party to the reseller's transaction with its customer.
Revenue is a function of the number of customers, the number of licenses with
each customer, the package to which each customer subscribes, the price of the
package and renewal rates. We offer subscriptions in a discrete range of
packages, with pricing based on specified feature sets and the number of
licenses managed by the customer as well as on a capacity-basis.
Fiscal Year
Our fiscal year ends on January 31st. References to fiscal 2021, for example,
are to the fiscal year ending January 31, 2021.
COVID-19 Update
In March 2020, the World Health Organization ("WHO") declared the coronavirus
disease ("COVID-19") as a pandemic. The COVID-19 pandemic has disrupted business
operations for us and our customers, suppliers, and other parties with whom we
do business and such disruptions are expected to continue for an indefinite
period of time. In an effort to control the spread of COVID-19, governments and
municipalities around the world have instituted restrictive measures, including
orders to shelter-in-place, travel restrictions, and mandated business closures.
More recently, certain regions and countries have begun phased re-openings of
businesses that were previously ordered to close.
As a result of the COVID-19 pandemic, we have temporarily closed our offices
requiring all of our employees globally to work remotely. We have restricted
non-essential business travel, and canceled in-person marketing events,
including our annual industry and customer event, ONWARD20, which had been
scheduled to occur in November 2020 in New York City. We continue to monitor
regional developments relating to the COVID-19 pandemic to inform decisions on
office re-openings and lifting of travel restrictions. The uncertain duration of
these measures have had and may continue to have increasingly negative effects
on our sales efforts and revenue growth rates.
Many of our customers and potential customers needs have been impacted by the
COVID-19 pandemic, and we are continuing to adapt to those needs. In response to
the COVID-19 pandemic, some existing and potential customers, in particular
customers in industries highly impacted by the pandemic such as retail and food
services, have, and we expect other customers may, reduce, suspend or delay
technology spending; request to renegotiate contracts to obtain concessions such
as, extended billing and payment terms; shorten the duration of contracts; or
elect not to renew their subscriptions.
Despite the economic challenges brought on by the COVID-19 pandemic, we are
committed to the long term overall health of our business, the strength of our
platform, and our ability to continue to execute on our strategy. Earlier this
year, we announced collaborations with the WHO, United States Department of
State, and the States of New Jersey and Alabama, to launch comprehensive
information hubs, powered by Yext Answers, that centralize accurate information
and updates about the pandemic. We also launched the No Wrong Answers integrated
marketing campaign to help more organizations across industries transform their
websites with Yext Answers, and are offering Yext Answers as a 90-day free
trial. More recently, we announced a global technology partnership with Adobe
where Adobe content management system clients can choose to upgrade their search
experience with Yext Answers. We also expanded Yext Answers into four new
languages: French, German, Italian, and Spanish.
The ultimate extent of the impact of the pandemic on our business, financial
condition and results of operations will depend on future developments, which
continue to be highly uncertain and cannot be predicted, including new
information that may emerge concerning the severity of the COVID-19 pandemic and
the actions taken to contain and address its impact, among others. However,
because we generally recognize revenue from our customer contracts ratably over
the term of the contract, changes in our contracting
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activity in the near term may not be fully reflected in our results of
operations and overall financial performance until future periods. See Part II
Item 1A "Risk Factors" for further discussion of the possible impact of the
COVID-19 pandemic on our business.
Components of Results of Operations
Revenue
We derive our revenue primarily from subscription and associated support to our
Yext platform. Our contracts are typically one year in length, but may be up to
three years or longer in length. Revenue is a function of the number of
customers, the number of licenses with each customer, the package to which each
customer subscribes, the price of the package and renewal rates. Revenue is
generally recognized ratably over the contract term beginning on the
commencement date of each contract, which is the date our platform is made
available to customers. At the beginning of each subscription term we invoice
our customers, typically in annual installments, but also monthly, quarterly,
and semi-annually. Amounts that have been invoiced for non-cancelable contracts
are recorded in accounts receivable and unearned revenue. Unearned revenue is
subsequently recognized as revenue when transfer of control to a customer has
occurred.
Cost of Revenue
Cost of revenue consists primarily of employee-related costs, including
personnel-related costs, which mainly consist of salaries and wages, and
stock-based compensation expense. Cost of revenue also includes fees associated
with our Knowledge Network application provider arrangements, the nature of
which may be unpaid, fixed, or variable, and are unpaid with many of our larger
providers. In addition, cost of revenue includes the costs associated with our
data centers, as well as depreciation expense, including with respect to certain
capitalized software development costs incurred in connection with additional
functionality to our platform. Cost of revenue also includes operating and
short-term lease expenses associated with our office spaces, which are allocated
based on employee headcount.
Operating Expenses
Sales and marketing expenses. Sales and marketing expenses consist primarily of
employee-related costs which are comprised of personnel-related costs and
stock-based compensation expense. Personnel-related costs mainly consist of
salaries and wages and costs of obtaining revenue contracts. Sales and marketing
expenses also include costs related to advertising and conferences and brand
awareness events. In addition, sales and marketing expenses include operating
and short-term lease expenses associated with our office spaces, which are
allocated based on employee headcount.
Research and development expenses. Research and development expenses consist
primarily of employee-related costs which are comprised of personnel-related
costs and stock-based compensation expense. Personnel-related costs mainly
consist of salaries and wages. Capitalized software development costs related to
additional functionality to our platform are excluded from research and
development expenses as they are capitalized as a component of property and
equipment, net and depreciated to cost of revenue over the term of their useful
life. Research and development expenses also include operating and short-term
lease expenses associated with our office spaces, which are allocated based on
employee headcount.
General and administrative expenses. General and administrative expenses consist
primarily of employee-related costs which are comprised of personnel-related
costs and stock-based compensation expense for our finance and accounting, human
resources, information technology and legal support departments.
Personnel-related costs mainly consist of salaries and wages. General and
administrative expenses also include operating and short-term lease expenses
associated with our office spaces, which are allocated based on employee
headcount, and other professional related costs.
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Results of Operations The following table sets forth selected condensed consolidated statement of operations data for each of the periods indicated:

                                                                                                         Six months ended July
                                            Three months ended July 31,                                           31,
(in thousands)                               2020                  2019                 2020                  2019
Revenue                                $       88,055$   72,373$   173,406$      141,081
Cost of revenue(1)                             21,984              19,269               43,168                  35,742
 Gross profit                                  66,071              53,104              130,238                 105,339
Operating expenses:
 Sales and marketing(1)                        56,049              52,371              114,569                  98,769
 Research and development(1)                   14,788              12,686               29,166                  22,592
 General and administrative(1)                 19,474              18,344               39,932                  33,535
 Total operating expenses                      90,311              83,401              183,667                 154,896
Loss from operations                          (24,240)            (30,297)             (53,429)                (49,557)
Interest income                                    47               1,377                  515                   2,283
Interest expense                                 (154)                (79)                (291)                   (132)
Other expense, net                               (423)               (203)                (507)                   (409)
Loss from operations before income
taxes                                         (24,770)            (29,202)             (53,712)                (47,815)
(Provision for) benefit from income
taxes                                            (346)                (89)                (628)                   (435)
Net loss                               $      (25,116)$  (29,291)$   (54,340)$      (48,250)

(1)Amounts include stock-based compensation expense as follows:

                                                                                                       Six months ended July
                                         Three months ended July 31,                                            31,
(in thousands)                            2020                   2019                 2020                  2019
Cost of revenue                     $        1,307$       988$     2,540$        1,806
Sales and marketing                          7,960                8,229               15,741                  15,069
Research and development                     3,933                3,058                7,876                   5,630
General and administrative                   4,030                4,334                8,445                   7,320
Total stock-based compensation
expense                             $       17,230$    16,609

$ 34,602$ 29,825



The following table sets forth selected condensed consolidated statements of
operations data for each of the periods indicated as a percentage of total
revenue:
                                                                                                             Six months ended July
                                           Three months ended July 31,                                                31,
                                          2020                    2019                    2020                     2019
Revenue                                        100  %                  100  %                  100  %                   100  %
Cost of revenue                                 25                      27                      25                       25
 Gross profit                                   75                      73                      75                       75
Operating expenses:
 Sales and marketing                            64                      72                      66                       70
 Research and development                       17                      18                      17                       16
 General and administrative                     22                      25                      23                       24
 Total operating expenses                      103                     115                     106                      110
Loss from operations                           (28)                    (42)                    (31)                     (35)
Interest income                                  -                       2                       -                        1
Interest expense                                 -                       -                       -                        -
Other expense, net                               -                       -                       -                        -
Loss from operations before income
taxes                                          (28)                    (40)                    (31)                     (34)
(Provision for) benefit from income
taxes                                           (1)                      -                       -                        -
Net loss                                       (29) %                  (40) %                  (31) %                   (34) %


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Three Months Ended July 31, 2020 Compared to Three Months Ended July 31, 2019
Revenue and Cost of Revenue
                                 Three months ended July 31,                             Variance
       (in thousands)           2020                       2019         Dollars       Percent
        Revenue           $      88,055$ 72,373$ 15,682           22  %
        Cost of revenue          21,984                   19,269       $  2,715           14  %
        Gross profit      $      66,071$ 53,104$ 12,967           24  %
        Gross margin               75.0   %                 73.4  %


Total revenue was $88.1 million for the three months ended July 31, 2020,
compared to $72.4 million for the three months ended July 31, 2019, an increase
of $15.7 million or 22%. This increase was primarily due to new customers and
expanded subscriptions sold to existing customers. Revenue from our enterprise
and mid-size customers, which include third-party reseller customers, grew 23%
from $69.2 million to $85.4 million, and excludes revenue from small business
customers, which by their nature have inherently high turnover.
Cost of revenue was $22.0 million for the three months ended July 31, 2020,
compared to $19.3 million for the three months ended July 31, 2019, an increase
of $2.7 million or 14%. This increase was primarily due to employee-related
costs reflecting higher headcount, including a $0.9 million increase in
personnel-related costs, which mainly consisted of salaries and wages, and a
$0.3 million increase in stock-based compensation expense. In addition, there
was a $0.6 million increase in costs associated with our data centers and a $0.4
million increase in depreciation expense.
Gross margin was 75.0% for the three months ended July 31, 2020, compared to
73.4% for the three months ended July 31, 2019.
Operating Expenses
                                       Three months ended July 31,                            Variance
  (in thousands)                           2020                   2019        Dollars      Percent
   Sales and marketing          $       56,049$ 52,371$ 3,678            7  %
   Research and development     $       14,788$ 12,686$ 2,102           17  %
   General and administrative   $       19,474$ 18,344$ 1,130            6  %


Sales and marketing expense was $56.0 million for the three months ended July
31, 2020, compared to $52.4 million for the three months ended July 31, 2019, an
increase of $3.7 million or 7%. The increase was primarily due to a $7.6 million
increase in personnel-related costs, which mainly consisted of salaries and
wages and costs to obtain revenue contracts, reflecting higher headcount, and
also included a $0.5 million increase in depreciation expense. These increases
were partially offset by an approximately $5.0 million decrease resulting from
certain expenses reduced in light of the COVID-19 pandemic, such as limited or
canceled employee travel, conferences and events.
Research and development expense was $14.8 million for the three months ended
July 31, 2020, compared to $12.7 million for the three months ended July 31,
2019, an increase of $2.1 million or 17%. The increase was primarily due to
employee-related costs reflecting higher headcount, including a $1.1 million
increase in personnel-related costs, which mainly consisted of salaries and
wages, and a $0.9 million increase in stock-based compensation expense.
General and administrative expense was $19.5 million for the three months ended
July 31, 2020, compared to $18.3 million for the three months ended July 31,
2019, an increase of $1.1 million or 6%. The general and administrative expense
was relatively consistent compared to the prior period, with the net increase of
$1.1 million primarily driven by a $1.6 million increase in the allowance for
doubtful accounts relating to extended billing and payment terms with certain
customers and considerations in light of impacts from the COVID-19 pandemic,
partially offset by $0.7 million in reduced expenses resulting from limited or
canceled employee travel, similarly in light of the COVID-19 pandemic.
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Six Months Ended July 31, 2020 Compared to Six Months Ended July 31, 2019 Revenue and Cost of Revenue

                                  Six months ended July 31,                            Variance
         (in thousands)           2020                   2019         Dollars       Percent
          Revenue           $    173,406$ 141,081$ 32,325           23  %
          Cost of revenue         43,168                35,742       $  7,426           21  %
          Gross profit      $    130,238$ 105,339$ 24,899           24  %
          Gross margin              75.1   %              74.7  %


Total revenue was $173.4 million for the six months ended July 31, 2020,
compared to $141.1 million for the six months ended July 31, 2019, an increase
of $32.3 million or 23%. This increase was primarily due to new customers and
expanded subscriptions sold to existing customers. Revenue from our enterprise
and mid-size customers, which include third-party reseller customers, grew 25%
from $134.6 million to $168.1 million, and excludes revenue from small business
customers, which by their nature have inherently high turnover.
Cost of revenue was $43.2 million for the six months ended July 31, 2020,
compared to $35.7 million for the six months ended July 31, 2019, an increase of
$7.4 million or 21%. This increase was primarily due to employee-related costs
reflecting higher headcount, including a $2.8 million increase in
personnel-related costs, which mainly consisted of salaries and wages, and a
$0.7 million increase in stock-based compensation expense. In addition, there
was a $1.3 million increase in costs associated with our data centers, a $0.6
million increase in depreciation expense, and a $0.6 million increase in
operating and short-term lease expenses, mainly as a result of our lease
arrangement for our new corporate headquarters in New York, NY which commenced
in May 2019.
Gross margin was 75.1% for the six months ended July 31, 2020, compared to 74.7%
for the six months ended July 31, 2019.
Operating Expenses
                                       Six months ended July 31,                             Variance
   (in thousands)                          2020                 2019        Dollars       Percent
    Sales and marketing          $      114,569$ 98,769$ 15,800           16  %
    Research and development     $       29,166$ 22,592$  6,574           29  %
    General and administrative   $       39,932$ 33,535$  6,397           19  %


Sales and marketing expense was $114.6 million for the six months ended July 31,
2020, compared to $98.8 million for the six months ended July 31, 2019, an
increase of $15.8 million or 16%. The increase was primarily due to
employee-related costs reflecting higher headcount, including a $18.0 million
increase in personnel-related costs, which mainly consisted of salaries and
wages and costs to obtain revenue contracts, and a $0.7 million increase in
stock-based compensation expense. In addition, there was a $2.1 million increase
in operating and short-term lease expenses, mainly as a result of our lease
arrangement for our new corporate headquarters in New York, NY which commenced
in May 2019. These increases were partially offset by an approximately $7.2
million decrease resulting from certain expenses reduced in light of the
COVID-19 pandemic, such as limited or canceled employee travel, conferences and
events.
Research and development expense was $29.2 million for the six months ended July
31, 2020, compared to $22.6 million for the six months ended July 31, 2019, an
increase of $6.6 million or 29%. The increase was primarily due to
employee-related costs reflecting higher headcount, including a $2.9 million
increase in personnel-related costs, which mainly consisted of salaries and
wages, and a $2.2 million increase in stock-based compensation expense. In
addition, there was a $0.5 million increase in operating and short-term lease
expenses, mainly as a result of our lease arrangement for our new corporate
headquarters in New York, NY which commenced in May 2019.
General and administrative expense was $39.9 million for the six months ended
July 31, 2020, compared to $33.5 million for the six months ended July 31, 2019,
an increase of $6.4 million or 19%. The increase was primarily due to
employee-related costs reflecting higher headcount, including a $2.5 million
increase in personnel-related costs, which mainly consisted of salaries and
wages, and a $1.1 million increase in stock-based compensation expense. In
addition, there was a $2.3 million increase in the allowance for doubtful
accounts relating to extended billing and payment terms with certain customers
and considerations in light of impacts from the COVID-19 pandemic, and a $0.5
million increase in operating and short-term lease expenses, mainly as a result
of our lease arrangement for our new corporate headquarters in New York, NY
which commenced in May 2019.
Liquidity and Capital Resources
As of July 31, 2020, our principal sources of liquidity were cash and cash
equivalents of $223.3 million. 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 cash
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flows, including net cash used in or provided by operating activities, may vary
significantly from quarter to quarter, due to the timing of billings, cash
collections, lease payments and capital expenditures, significant marketing
events and related expenses, the potential effects of the COVID-19 pandemic,
among other factors.
Our future capital requirements will depend on many factors, including those set
forth under "Risk Factors." We may in the future enter into arrangements to
acquire or invest in complementary businesses, services, technologies, and
intellectual property rights. We have and will continue to enter into new lease
arrangements for new and expanded facilities, such as our lease arrangement for
our new corporate headquarters in New York, NY, which commenced in May 2019. In
connection with these arrangements, we expect our lease expenses and related
capital expenditures to increase, which may limit our ability to take advantage
of business opportunities or respond to changing business or market conditions.
In addition, 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.
Credit Arrangements
On March 16, 2016, we entered into a Loan and Security agreement with Silicon
Valley Bank ("SVB") that provides for a $15.0 million revolving credit line
("Revolving Line") and a $7.0 million Letter of Credit facility (together with
the Revolving Line, the "Credit Agreement"). In March 2018, the Credit Agreement
was amended to extend the maturity date to March 16, 2020. On March 11, 2020, we
replaced our existing Credit Agreement and entered into a new credit agreement
with Silicon Valley Bank (the "March 2020 Credit Agreement"). No significant
debt issuance costs were incurred in association with the March 2020 Credit
Agreement.
The March 2020 Credit Agreement provides for a senior secured revolving loan
facility of up to $50.0 million that matures three years after the effective
date, with the right subject to certain conditions to add an incremental
revolving loan facility of up to $50.0 million in the aggregate. The three-year
revolving loan facility provides for borrowings up to the amount of the facility
with sub-limits of up to (i) $30.0 million to be available for the issuance of
letters of credit and (ii) $10.0 million to be available for swingline loans.
Under the March 2020 Credit Agreement, loans bear interest, at our option, at an
annual rate based on LIBOR or a base rate. Loans based on LIBOR shall bear
interest at a rate between LIBOR plus 2.50% and LIBOR plus 3.00%, depending on
our average daily usage of the revolving loan facility. Loans based on the base
rate shall bear interest at a rate between the base rate minus 0.50% and the
base rate plus 0.00%, depending on our average daily usage of the revolving loan
facility. See Part II Item 1A "Risk Factors - Our new credit facility contains
restrictive covenants that may limit our operating flexibility" for discussion
of LIBOR being phased out.
The obligations under the March 2020 Credit Agreement are secured by a lien on
substantially all of our tangible and intangible property and by a pledge of all
of our equity interests of material direct and indirect domestic subsidiaries
and 66% of each class of capital stock of any material first-tier foreign
subsidiaries, subject to limited exceptions.
The March 2020 Credit Agreement contains customary affirmative and negative
covenants and restrictions, as well as financial covenants that require us to
maintain the year-over-year growth rate of its ordinary course recurring revenue
for a trailing four fiscal quarter period above specified rates when certain
liquidity thresholds are not met and to maintain a consolidated quick ratio of
at least 1.50 to 1.00 tested on a monthly basis.
As of January 31, 2020, we had back-to-back standby letters of credit for $12.1
million, which were fully secured by a $12.1 million cash deposit. The $12.1
million was classified as restricted cash on our condensed consolidated balance
sheet. In connection with the March 2020 Credit Agreement, the $12.1 million
cash deposit was released and is no longer classified as restricted cash on our
condensed consolidated balance sheet as of July 31, 2020.
    As of July 31, 2020, we were in compliance with all debt covenants. As of
such date, the $50.0 million revolving loan facility had $30.4 million available
and $19.6 million in letters of credit allocated as security in connection with
office space.
Cash Flows
The following table summarizes our cash flows:
                                                                       Six months ended July 31,
(in thousands)                                                         2020                  2019
 Net cash (used in) operating activities                         $      

(16,295) $ (10,617)

 Net cash (used in) provided by investing activities             $      

(40,055) $ 41,348

 Net cash provided by financing activities                       $        

9,664 $ 159,024



Operating Activities
Net cash used in operating activities of $16.3 million for the six months ended
July 31, 2020 was primarily due to the net loss of $54.3 million, as well as
changes in unearned revenue of $31.4 million, changes in prepaid expenses and
other current assets of $7.9 million and accounts payable, accrued expenses and
other current liabilities of $7.0 million, respectively, associated with the
timing of invoices and payments. This was partially offset by positive
adjustments in reconciling our net loss to net cash used in operating
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activities related to changes in accounts receivable of $26.0 million, mainly
due to timing of billing and cash collections during the period, as well as
changes in costs to obtain revenue contracts of $3.7 million and operating lease
liabilities of $3.7 million. Net cash used in operating activities was also
partially offset by non-cash charges related to stock-based compensation expense
of $34.6 million, amortization of operating lease right-of-use assets of $6.8
million, depreciation and amortization expense of $5.2 million, and bad debt
expense of $2.3 million which includes an increase in the allowance for doubtful
accounts relating to extended billing and payment terms with certain customers
and considerations in light of impacts from the COVID-19 pandemic.
Net cash used in operating activities of $10.6 million for the six months ended
July 31, 2019 was primarily due to the net loss of $48.3 million, changes in
unearned revenue of $12.2 million and costs to obtain revenue contracts of $2.6
million. These decreases were partially offset by a change in accounts
receivable of $17.9 million, mainly due to timing of billing and cash
collections during the period. In addition, non-cash charges related to
stock-based compensation expense of $29.8 million, amortization of operating
right-of-use assets of $4.7 million, and depreciation and amortization of $3.8
million, resulted in positive adjustments in reconciling our net loss to net
cash used in operating activities.
Investing Activities
Net cash used in investing activities of $40.1 million for the six months ended
July 31, 2020 reflected capital expenditures primarily associated with our new
corporate headquarters in New York, NY, and our office spaces in Rosslyn, VA and
Tokyo, Japan, among others. We expect our investments in capital expenditures
associated with our new office space will continue to drive our cash used in
investing activities for the fiscal year ending January 31, 2021 as we work to
complete the build-out of our new offices. We will continue to evaluate our real
estate strategy in light of our evolving needs for office space.
Net cash provided by investing activities of $41.3 million for the six months
ended July 31, 2019 was related to maturities associated with marketable
securities of $45.8 million, partially offset by capital expenditures of $4.4
million.
Financing Activities
Net cash provided by financing activities of $9.7 million for the six months
ended July 31, 2020 was primarily related to proceeds from exercise of stock
options of $6.7 million and net proceeds from employee stock purchase plan
withholdings of $3.7 million, partially offset by payments of deferred financing
costs of $0.7 million.
Net cash provided by financing activities of $159.0 million for the six months
ended July 31, 2019 was primarily related to proceeds from our common stock
offering of $147.0 million, net of underwriting discounts and commissions, as
well as proceeds from exercises of stock options of $9.2 million, and net
proceeds from employee stock purchase plan withholdings of $3.6 million.
Contractual Obligations
We are obligated to make payments under certain non-cancelable contractual
obligations in the normal course of business. Our contractual obligations
primarily relate to our operating lease arrangements for office space. Our other
contractual obligations include contracts with our Knowledge Network application
providers, which generally have a term of one year, and our software vendors,
among others. These obligations represent minimum contractual payments, or our
best estimate for variable elements based on historical payments. Our
contractual obligations have various expiry dates between fiscal years 2021 and
2035.

As of July 31, 2020, future minimum payments under these contractual obligations are as follows (in thousands): Fiscal year ending January 31: Operating Leases Other 2021 (remainder of fiscal year) $

           6,865      $ 19,352
2022                                            19,385        10,865
2023                                            19,337         4,691
2024                                            18,818         1,874
2025                                            18,289         1,494
2026 and thereafter                            111,377         2,862
Total                                $         194,071      $ 41,138


See Note 13 "Commitments and Contingencies" to our condensed consolidated
financial statements for further discussion on contractual obligations.
Off-Balance Sheet Arrangements
We do not engage in transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, as part of our ongoing business.
Accordingly, our operating results, financial condition and cash flows are not
subject to off-balance sheet risks.
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Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP"). The preparation of these financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported revenue generated and
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about items that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
See Note 2 "Summary of Significant Accounting Policies," to our condensed
consolidated financial statements, included in this Quarterly Report on Form
10-Q, for further discussion on our accounting policies. There have been no
material changes to our critical accounting policies and estimates as compared
to those disclosed in our Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Note 2 "Summary of Significant Accounting Policies- Recent Accounting
Pronouncements," to the condensed consolidated financial statements for our
discussion about adopted and pending recent accounting pronouncements.
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