ZOOM VIDEO COMMUNICATIONS, INC.
You should read the following discussion and analysis of our financial condition
and results of operations together with the unaudited condensed consolidated
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q. This discussion contains forward-looking statements based
upon current expectations that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those discussed in the
section titled "Risk Factors" and in other parts of this Quarterly Report on
Form 10-Q.
Overview
Our mission is to make video communications frictionless and secure.
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We provide a video communications platform that delivers happiness and helps our
users express ideas and connect to others. We connect people through our unified
communications, developer, and events platform. Our platform is chosen by
enterprises around the globe because it is reliable; scalable; secure; easy to
deploy, use, and manage; provides an attractive return on investment; and
integrates with a vast ecosystem of applications and physical spaces. We believe
that face-to-face communications build greater empathy and trust. We strive to
live up to the trust our customers place in us by delivering a communications
solution while prioritizing their privacy and security. Our 22 co-located data
centers worldwide and the public cloud enable us to provide both high-quality
and high-definition, real-time video to our customers even in low-bandwidth
environments.
We generate revenue from the sale of subscriptions to our video communications
platform. Subscription revenue is driven primarily by the number of paid hosts
as well as purchases of additional products, including Zoom Rooms, Zoom Video
Webinars, Zoom Phone, and Hardware-as-a-Service ("HaaS") for rooms and phones. A
host is any user of our unified communications platform who initiates a Zoom
Meeting and invites one or more participants to join that meeting. We refer to
hosts who subscribe to a paid Zoom Meeting plan as "paid hosts." We define a
customer as a separate and distinct buying entity, which can be a single paid
user or host or an organization of any size (including a distinct unit of an
organization) that has multiple paid hosts. Our Basic offering is free and gives
hosts access to Zoom Meetings with core features but with the limitation that
meetings with more than two endpoints time-out at 40 minutes. Our paid offerings
include our Pro, Business, Enterprise, Education, and Healthcare plans, which
provide incremental features and functionality, such as different participant
limits, administrative controls, and reporting.
For Zoom Phone, plans include Zoom Phone Pro, which provides
extension-to-extension calling or can be used with the Bring Your Own Carrier
model wherein the customer connects Zoom Phone to an existing carrier. We also
offer Regional Unlimited and Regional Metered calling plans in three specific
markets (United States /Canada , United Kingdom /Ireland , and Australia /New
Zealand ). In addition, we introduced the Global Select plan in August 2020 ,
which allows customers to select from local numbers and domestic calling in more
than 40 countries and territories where Zoom has local public switched telephone
network ("PSTN") coverage. In addition, the Zoom United plan launched in
December 2020 provides a single license for customers to purchase Zoom Phone,
Meetings and chat capabilities as a bundled offering.
Our revenue was $956.2 million and $328.2 million for the three months ended
April 30, 2021 and 2020, respectively, representing a period-over-period growth
rate of 191%. We had net income of $227.5 million and $27.1 million for the
three months ended April 30, 2021 and 2020, respectively. Net cash provided by
operating activities was $533.3 million and $259.0 million for the three months
ended April 30, 2021 and 2020, respectively.
Impact of the COVID-19 Pandemic
In March 2020 , the World Health Organization declared COVID-19 a pandemic,
affecting many countries around the world. Governments have instituted lockdown
or other similar measures to slow infection rates. Many organizations have
resorted to mandating employees to work from home, which has resulted in these
organizations seeking out video communication solutions like ours to keep
employees as productive as possible, even while working from home. Schools,
colleges, and universities globally have also closed as a result of this
pandemic. Many of these institutions are utilizing our platform to provide
remote instruction to their students. To help teachers and students navigate
this unprecedented situation, we have temporarily removed the 40-minute time
limit for meetings with more than two endpoints from our free Basic accounts for
more than 125,000 K-12 domains worldwide.
While we have experienced a significant increase in paid hosts and revenue due
to the pandemic, the aforementioned factors have also driven increased usage of
our services and have required us to expand our network, data storage, and
processing capacity, both in our own co-located data centers as well as through
third-party cloud hosting, which has resulted, and is continuing to result, in
an increase in our operating costs. Furthermore, a significant portion of the
increase in usage of our platform is attributable to free Basic accounts and our
removal of the time limit for school domains, which do not generate any revenue,
but still require us to incur these additional operating costs to expand our
capacity. Therefore, the recent increase in usage of our platform has adversely
affected, and may continue to adversely affect, our gross margin.
In addition, there is no assurance that we will experience an increase in paid
hosts or that new or existing users will continue to utilize our service after
the COVID-19 pandemic has tapered globally. Moreover, the tapering of the
COVID-19 pandemic, particularly as vaccinations become widely available, may
result in a decline in paid hosts and users once individuals are no longer
working or attending school from home.
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Key Factors Affecting Our Performance
Acquiring New Customers
We are focused on continuing to grow the number of customers that use our
platform. Our operating results and growth prospects will depend, in part, on
our ability to attract new customers. While we believe there is a significant
market opportunity that our platform addresses, it is difficult to predict
customer adoption rates or the future growth rate and size of the market for our
platform. We will need to continue to invest in sales and marketing in order to
address this opportunity by hiring, developing, and retaining talented sales
personnel who are able to achieve desired productivity levels in a reasonable
period of time.
Expansion of Zoom Across Existing Customers
We believe that there is a large opportunity for growth with many of our
existing customers. Many customers have increased the size of their
subscriptions as they have expanded their use of our platform across their
operations. Some of our larger enterprise customers start with a deployment of
Zoom Meetings with one team, location, or geography, before rolling out our
platform throughout their organization. Several of our largest customers have
deployed our platform globally to their entire workforce following smaller
initial deployments. This expansion in the use of our platform also provides us
with opportunities to market and sell additional products to our customers, such
as Zoom Phone, Zoom HaaS, Zoom for Home, Zoom Rooms at each office location, and
Zoom Video Webinars. In order for us to address this opportunity to expand the
use of our products with our existing customers, we will need to maintain the
reliability of our platform and produce new features and functionality that are
responsive to our customers' requirements for enterprise-grade solutions.
We quantify our expansion across existing customers through our net dollar
expansion rate. Our net dollar expansion rate includes the increase in user
adoption within our customers, as our subscription revenue is primarily driven
by the number of paid hosts within a customer and the purchase of additional
products, and compares our subscription revenue from the same set of customers
across comparable periods. We calculate net dollar expansion rate as of a period
end by starting with the annual recurring revenue ("ARR") from all customers
with more than 10 employees as of 12 months prior ("Prior Period ARR"). We
define ARR as the annualized revenue run rate of subscription agreements from
all customers at a point in time. We calculate ARR by taking the monthly
recurring revenue ("MRR") and multiplying it by 12. MRR is defined as the
recurring revenue run-rate of subscription agreements from all customers for the
last month of the period, including revenue from monthly subscribers who have
not provided any indication that they intend to cancel their subscriptions. We
then calculate the ARR from these customers as of the current period end
("Current Period ARR"), which includes any upsells, contraction, and attrition.
We divide the Current Period ARR by the Prior Period ARR to arrive at the net
dollar expansion rate. For the trailing 12-months calculation, we take an
average of the net dollar expansion rate over the trailing 12 months. Our net
dollar expansion rate may fluctuate as a result of a number of factors,
including the level of penetration within our customer base, expansion of
products and features, and our ability to retain our customers. Our trailing
12-month net dollar expansion rate in customers with more than 10 employees was
greater than 130% as of April 30, 2021 and 2020.
Innovation and Expansion of Our Platform
We continue to invest resources to enhance the capabilities of our platform. For
example, we have recently introduced a number of product enhancements, including
new features for Zoom Phone, Zoom Meetings, and Zoom Video Webinars. We
addressed new work-from-home realities with the introduction of Zoom for Home, a
solution designed for the home office that combines Zoom software enhancements
with compatible hardware. We also expanded our geographic footprint with Zoom
Phone availability in two new countries and territories during fiscal year 2022,
bringing the total to 46. Third-party developers are also a key component of our
strategy for platform innovation to make it easier for customers and developers
to extend our product portfolio with new functionalities. We believe that as
more developers and other third parties use our platform to integrate major
third-party applications, we will become the ubiquitous platform for
communications. We will need to expend additional resources to continue
introducing new products, features, and functionality, and supporting the
efforts of third parties to enhance the value of our platform with their own
applications.
An end-to-end encryption ("E2EE") option is available to free and paid Zoom
customers globally who host meetings with up to 200 participants. Zoom's E2EE
uses the same AES-256-GCM encryption that secures Zoom meetings by default, but
with Zoom's new E2EE, the meeting host generates encryption keys and uses public
key cryptography to distribute these keys to the other meeting participants.
In October 2020 , we introduced two additions to the Zoom platform: OnZoom and
Zoom Apps. OnZoom is an online event platform for Zoom users to create and host
free, paid, and fundraising events. OnZoom is currently offered as a public beta
for U.S. users to attend online events. Zoom Apps is a new app type coming soon
to the Zoom App Marketplace . These in-product integrations will be accessible
directly from Zoom Meetings client and are designed to enhance meeting workflows
and increase productivity.
23-------------------------------------------------------------------------------- Table of Contents International Expansion Our platform addresses the communications needs of users worldwide, and we see international expansion as a major opportunity. Our revenue from the rest of world (APAC and EMEA) represented 34% and 25% of our total revenue for the three months endedApril 30, 2021 and 2020, respectively. We plan to add local sales support in further select international markets over time. We use strategic partners and resellers to sell in certain international markets where we have limited or no direct sales presence. While we believe global demand for our platform will continue to increase as international market awareness of Zoom grows, our ability to conduct our operations internationally will require considerable management attention and resources, and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems, and commercial markets. Key Business Metrics We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. Customers with More Than 10 Employees Increasing awareness of our platform and its broad range of capabilities has enabled us to substantially expand our customer base, which includes organizations of all sizes across industries. We define a customer as a separate and distinct buying entity, which can be a single paid host or an organization of any size (including a distinct unit of an organization) that has multiple paid hosts. To better distinguish business customers from our broader customer base, we review the number of customers with more than 10 employees. As ofApril 30, 2021 and 2020, we had approximately 497,000 and 265,400 customers, respectively, with more than 10 employees. When disclosing the number of customers, we round down to the nearest hundred. Since the start of the COVID-19 pandemic, our customer cohort with 10 or fewer employees expanded as business owners and individual users adopted Zoom for many personal, professional, and social events. As a result, we have experienced a shift in the makeup of customer cohorts, with 37% of revenue attributable to customers with 10 or fewer employees during the three months endedApril 30, 2021 , compared to 30% for the three months endedApril 30, 2020 . Customers Contributing More Than$100,000 of Trailing 12 Months Revenue We focus on growing the number of customers that contribute more than$100,000 of trailing 12 months revenue as it is a measure of our ability to scale with our customers and attract larger organizations to Zoom. Revenue from these customers represented 19% and 23% of total revenue for the three months endedApril 30, 2021 and 2020, respectively. As ofApril 30, 2021 and 2020, we had 1,999 and 769 customers, respectively, that contributed more than$100,000 of trailing 12 months revenue, demonstrating our rapid penetration of larger organizations, including enterprises. These customers are a subset of the customers with more than 10 employees. Non-GAAP Financial Measure In addition to our results determined in accordance with GAAP, we believe that free cash flow ("FCF"), a non-GAAP financial measure, is useful in evaluating our liquidity. Free Cash Flow We define FCF as GAAP net cash provided by operating activities less purchases of property and equipment. We believe that FCF is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our operations that, after investments in property and equipment, can be used for future growth. FCF is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. It is important to note that other companies, including companies in our industry, may not use this metric, may calculate this metric differently, or may use other financial measures to evaluate their liquidity, all of which could reduce the usefulness of this non-GAAP metric as a comparative measure. 24
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The following table presents a summary of our cash flows for the periods
presented and a reconciliation of FCF to net cash provided by operating
activities, the most directly comparable financial measure calculated in
accordance with GAAP:
Three Months Ended April 30,
2021 2020
(in thousands)
Net cash provided by operating activities $
533,302
Less: purchases of property and equipment (79,074) (7,272) Free cash flow (non-GAAP) $ 454,228$ 251,693 Net cash used in investing activities$ (1,219,978) $ (63,034) Net cash (used in) provided by financing activities $
(6,279)
Components of Results of Operations
Revenue
We derive our revenue from subscription agreements with customers for access to
our unified communications platform. Our customers generally do not have the
ability to take possession of our software. We also provide services, which
include professional services, consulting services, and online event hosting,
which are generally considered distinct from the access to our unified
communications platform.
Cost of Revenue
Cost of revenue primarily consists of costs related to hosting our unified
communications platform and providing general operating support services to our
customers. These costs are related to our co-located data centers, third-party
cloud hosting, integrated third-party PSTN services, personnel-related expenses,
amortization of capitalized software development and acquired intangible assets,
royalty payments, and allocated overhead. We expect our cost of revenue to
increase in absolute dollars for the foreseeable future, as we expand our data
center capacity due to increased usage stemming from the COVID-19 pandemic.
However, the cost of revenue as a percentage of revenue may decrease over time
as we scale our data centers to accommodate usage from our increased customer
base and as the ratio of free to paid users varies.
Operating Expenses
Research and Development
Research and development expenses primarily consist of personnel-related
expenses directly associated with our research and development organization,
depreciation of equipment used in research and development, and allocated
overhead. Research and development costs are expensed as incurred. We plan to
increase our investment in research and development for the foreseeable future,
primarily by increasing research and development headcount, as we focus on
further developing our platform, enhancing its use cases, and strengthening
security and privacy. As a result, we expect our research and development
expenses to increase both in absolute dollars and as a percentage of revenue for
the rest of the current fiscal year.
Sales and Marketing
Sales and marketing expenses primarily consist of personnel-related expenses
directly associated with our sales and marketing organization. Other sales and
marketing expenses include advertising and promotional events to promote our
brand, such as awareness programs, digital programs, public relations,
tradeshows, and our user conference, Zoomtopia, and allocated overhead. Sales
and marketing expenses also include credit card processing fees related to sales
and amortization of deferred contract acquisition costs. We plan to increase our
investment in sales and marketing over the foreseeable future, primarily by
increasing the headcount of our direct sales force and marketing investments in
demand generation. As a result, we expect our sales and marketing expenses to
increase both in absolute dollars and as a percentage of revenue for the rest of
the current fiscal year.
General and Administrative
General and administrative expenses primarily consist of personnel-related
expenses associated with our finance and legal organizations; professional fees
for external legal, accounting, and other consulting services; expected credit
losses; insurance; indirect taxes; and allocated overhead. We expect to increase
the size of our general and administrative function to support the growth and
complexity of our business. However, given the litigation settlement expense,
net of amounts estimated
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to be covered by insurance recorded in the current fiscal quarter, we expect our
general and administrative expenses, both in absolute dollars and as a
percentage of revenue, to be lower for the foreseeable future.
Interest Income and Other, Net
Interest income and other, net consists primarily of interest income and net
accretion earned on our marketable securities, effect of changes in foreign
currency exchange rates, and remeasurement gains or losses on our equity
investment.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes related to
federal, state, and foreign jurisdictions where we conduct business.
Results of Operations
The following tables set forth selected condensed consolidated statements of
operations data and such data as a percentage of revenue for each of the periods
indicated:
Three Months Ended April 30,
2021 2020
(in thousands)
Revenue $ 956,237 $ 328,167
Cost of revenue (1) 264,994 103,707
Gross profit 691,243 224,460
Operating expenses:
Research and development (1) 65,175 26,389
Sales and marketing (1) 245,667 121,556
General and administrative (1) 154,089 53,130
Total operating expenses 464,931 201,075
Income from operations 226,312 23,385
Interest income and other, net 2,619 5,790
Income before provision for income taxes 228,931 29,175
Provision for income taxes 1,400 2,100
Net income $ 227,531 $ 27,075
(1) Includes stock-based compensation expense as follows:
Cost of revenue $ 14,066 $ 3,249
Research and development 20,819 5,224
Sales and marketing 51,812 17,123
General and administrative 12,272 3,181
Total stock-based compensation expense $ 98,969 $ 28,777
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Three Months Ended April 30,
2021 2020
(as a percentage of revenue)
Revenue 100 % 100 %
Cost of revenue 28 32
Gross profit 72 68
Operating expenses:
Research and development 7 8
Sales and marketing 26 37
General and administrative 16 16
Total operating expenses 49 61
Income from operations 23 7
Interest income and other, net 1 2
Income before provision for income taxes 24 9 Provision for income taxes 0 1 Net income 24 % 8 % Comparison of the Three Months EndedApril 30, 2021 and 2020 Revenue Three Months Ended April 30, 2021 2020 % Change (in thousands) Revenue$ 956,237 $ 328,167 191 % Revenue for the three months endedApril 30, 2021 increased by$628.1 million , or 191%, compared to the three months endedApril 30, 2020 . The increase in revenue was due to a combination of subscription services provided to new customers, which accounted for approximately 57% of the increase, and to subscription services provided to existing customers, which accounted for approximately 43% of the increase. Cost of Revenue Three Months Ended April 30, 2021 2020 % Change (in thousands) Cost of revenue$ 264,994 $ 103,707 156 % Gross profit 691,243 224,460 208 % Gross margin 72 % 68 % Cost of revenue for the three months endedApril 30, 2021 increased by$161.3 million , or 156%, compared to the three months endedApril 30, 2020 . In response to the COVID-19 pandemic, we have temporarily removed the 40-minute time limit for meetings with more than two endpoints from our free Basic accounts for more than 125,000 K-12 school domains worldwide. We also continued to experience an increase in usage from paid users as more companies utilized our platform to allow their employees to work remotely. This increase in usage resulted in an increase of$120.3 million in costs related to third-party cloud hosting, integrated third-party PSTN services, and our co-located data centers to support the increase in customers and expanded use of our unified communications platform by existing and new customers. The remaining increase was primarily due to an increase of$24.6 million in personnel-related expenses, which includes an increase of$10.8 million in stock-based compensation expense, mainly driven by additional headcount; an increase of$7.4 million in professional services, mainly for customer support; and an increase of$4.6 million related to subscription to software-based services. Gross margin increased to 72% for the three months endedApril 30, 2021 from 68% for the three months endedApril 30, 2020 . The increase in gross margin was mainly due to increased efficiencies as we expanded our data center capacity to accommodate the increased usage stemming from the COVID-19 pandemic as well as lower rates from third-party cloud hosting providers. 27 --------------------------------------------------------------------------------
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Operating Expenses
Research and Development
Three Months Ended April 30,
2021 2020 % Change
(in thousands)
Research and development $ 65,175 $ 26,389 147 %
Research and development expense for the three months ended
Three Months Ended April 30,
2021 2020 % Change
(in thousands)
Sales and marketing $ 245,667 $ 121,556 102 %
Sales and marketing expense for the three months ended April 30, 2021 increased
by $124.1 million , or 102%, compared to the three months ended April 30, 2020 .
The increase in sales and marketing expense was primarily due to higher
personnel-related expenses of $97.2 million , mainly driven by additional
headcount in our sales force to support increased demand, which includes a
$34.7 million increase in stock-based compensation expense and a $21.5 million
increase in amortization of deferred contract acquisition costs driven by our
increase in revenue. The remaining increase was primarily due to an increase of
$14.0 million in credit card processing fees as a result of increased online
payments, and an increase of $5.1 million in marketing and sales event-related
costs, mainly due to an increase in digital and social media programs.
General and Administrative
Three Months Ended April 30,
2021 2020 % Change
(in thousands)
General and administrative $ 154,089 $ 53,130 190 %
General and administrative expense for the three months ended April 30, 2021
increased by $101.0 million , or 190%, compared to the three months ended
April 30, 2020 . The increase in general and administrative expense was primarily
due to an increase of $66.9 million in litigation settlement expense, net of
amounts estimated to be covered by insurance; an increase of $22.6 million in
personnel-related expenses, which includes a $9.1 million increase in
stock-based compensation expense, mainly driven by additional headcount; and an
increase of $14.6 million in professional services consisting primarily of legal
and other professional service fees.
Interest Income and Other, Net
Three Months Ended April 30,
2021 2020 % Change
(in thousands)
Interest income and other, net $ 2,619 $ 5,790 (55) %
Interest income and other, net for the three months endedApril 30, 2021 decreased by$3.2 million , or 55%, compared to the three months endedApril 30, 2020 . The decrease was primarily due to a lack of remeasurement gain in our investments for the three months endedApril 30, 2021 , while$2.5 million was recorded for the three months endedApril 30, 2020 . 28 --------------------------------------------------------------------------------
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Provision for Income Taxes
Three Months Ended April 30,
2021 2020 % Change
(in thousands)
Provision for income taxes $ 1,400 $ 2,100 (33) %
Provision for income taxes for the three months ended April 30, 2021 decreased
by $0.7 million , or 33%, compared to the three months ended April 30, 2020 . The
change was primarily due to a decrease in the annual effective tax rate
attributable to increased net operating loss carryovers and stock-based
compensation deductions. Our calculation of income tax expense is dependent in
part on forecasts of full-year results.
Liquidity and Capital Resources
As of April 30, 2021 , our principal sources of liquidity were cash, cash
equivalents, and marketable securities of $4.7 billion , which were held for
working capital purposes and for investment in growth opportunities. Our
marketable securities generally consist of high-grade commercial paper,
corporate bonds, agency bonds, corporate and other debt securities, U.S.
government agency securities, and treasury bills.
We have financed our operations primarily through income from operations and
sales of equity securities. Cash from operations could also be affected by
various risks and uncertainties, including, but not limited to, the effects of
the COVID-19 pandemic, including timing of cash collections from our customers
and other risks detailed in the section titled "Risk Factors." However, based on
our current business plan and revenue prospects, we believe our existing cash,
cash equivalents, and marketable securities, together with net cash provided by
operations, will be sufficient to meet our needs for at least the next 12 months
and allow us to capitalize on growth opportunities. Our future capital
requirements will depend on many factors, including our revenue growth rate,
subscription renewal activity, billing frequency, the timing and extent of
spending to support further sales and marketing and research and development
efforts, as well as expenses associated with our international expansion, and
the timing and extent of additional capital expenditures to invest in existing
and new office spaces as well as data center infrastructure. We may, in the
future, enter into arrangements to acquire or invest in complementary
businesses, services, and technologies, including intellectual property rights.
We may be required to seek additional equity or debt financing. In the event
that additional financing is required from outside sources, we may not be able
to raise it on terms acceptable to us or at all. If we are unable to raise
additional capital when desired, our business, results of operations, and
financial condition would be materially and adversely affected.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Three Months Ended April 30,
2021 2020
(in thousands)
Net cash provided by operating activities $ 533,302 $ 258,965
Net cash used in investing activities $ (1,219,978) $ (63,034)
Net cash (used in) provided by financing activities $
(6,279)
Operating Activities Our largest source of operating cash is cash collections from our customers for subscriptions to our platform. Our primary uses of cash from operating activities are for employee-related expenditures, costs related to hosting our platform, and marketing expenses. Net cash provided by operating activities is affected by our net income adjusted for certain non-cash items, such as stock-based compensation expense and depreciation and amortization expenses, as well as the effect of changes in operating assets and liabilities. Net cash provided by operating activities was$533.3 million for the three months endedApril 30, 2021 , compared to$259.0 million for the three months endedApril 30, 2020 . The increase in operating cash flow was due to an increase in net income of$200.5 million and an increase in non-cash adjustments of$105.5 million , which is primarily a result of higher stock-based compensation expense and higher deferred contract acquisition cost amortization due to an increase in capitalized commissions as we continue to grow and expand our customer base, offset by the negative impact from changes in operating assets and liabilities of$31.7 million . 29
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Table of Contents Investing Activities Net cash used in investing activities of$1,220.0 million for the three months endedApril 30, 2021 was primarily due to net purchases of marketable securities of$1,134.4 million , purchases of property and equipment of$79.1 million , and purchases of convertible notes of$6.5 million . Net cash used in investing activities of$63.0 million for the three months endedApril 30, 2020 was primarily due to net purchases of marketable securities of$43.9 million , purchase of an equity investment of$8.0 million , purchases of property and equipment of$7.3 million , and purchase of a convertible note of$5.0 million . Financing Activities Net cash used in financing activities of$6.3 million for the three months endedApril 30, 2021 was primarily due to proceeds from employee equity transactions remitted to employees and tax authorities, net, of$10.0 million , partially offset by proceeds from the exercise of stock options of$3.4 million . Net cash provided by financing activities of$228.1 million for the three months endedApril 30, 2020 was due to proceeds from employee equity transactions to be remitted to employees and tax authorities, net, of$218.5 million and proceeds from the exercise of stock options of$9.6 million . Commitments and Contractual Obligations There have been no material changes to our contractual obligations and commitments from those disclosed in our Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year endedJanuary 31, 2021 , filed with theSEC onMarch 18, 2021 . Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by theSEC under the Securities Act. Critical Accounting Policies and Estimates Critical accounting policies and estimates are those accounting policies and estimates that are both most important to the portrayal of our net assets and results of operations and require the most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the impact of the estimates on financial condition or operating performance is material. There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year endedJanuary 31, 2021 , filed with theSEC onMarch 18, 2021 .
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