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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________________________________________________________________
FORM 10-Q
___________________________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38933
___________________________________________________________________________________________________
CROWDSTRIKE HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
___________________________________________________________________________________________________
Delaware45-3788918
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
150 Mathilda Place, Suite 300, Sunnyvale, California 94086
(Address of principal executive offices)
__________________________________________________________________________________________________
Registrant’s telephone number, including area code: (888512-8906
___________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0005 per shareCRWDThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    ☑  No   
Indicate by check mark whether the registrant has submitted electronically every interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes        No    
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated Filer
Smaller reporting company
(Do not check if a smaller reporting company)Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No    
As of November 30, 2021, the number of shares of the registrant’s Class A common stock outstanding was 208,207,247, and the number of shares of the registrant’s Class B common stock outstanding was 21,132,067.



Table of Contents
CROWDSTRIKE HOLDINGS, INC.
TABLE OF CONTENTS
Page No.
Item 2.
Item 3.
Item 4.
Item 5.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.
These forward-looking statements include, but are not limited to, statements concerning the following:
our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development, and general and administrative expenses), and our ability to achieve, and maintain, future profitability;
the impact of the COVID-19 pandemic on our operations, financial results, and liquidity and capital resources, including on customers, sales, expenses, and employees;
market acceptance of our cloud platform;
the effects of increased competition in our markets and our ability to compete effectively;
our ability to maintain the security and availability of our cloud platform;
our ability to maintain and expand our customer base, including by attracting new customers;
our ability to develop new solutions, or enhancements to our existing solutions, and bring them to market in a timely manner;
anticipated trends, growth rates and challenges in our business and in the markets in which we operate;
our business plan and our ability to effectively manage our growth and associated investments;
beliefs and objectives for future operations;
our relationships with third parties, including channel partners and technology alliance partners;
our ability to maintain, protect and enhance our intellectual property rights;
our ability to successfully defend litigation brought against us;
our ability to successfully expand in our existing markets and into new markets;
sufficiency of cash and cash equivalents to meet cash needs for at least the next 12 months;
our ability to expand internationally;
our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
our ability to develop, maintain, and improve our internal control over financial reporting;
instability in the global credit and financial markets;
our ability to successfully close and integrate acquisitions to contribute to our growth objectives; and
the attraction and retention of qualified employees and key personnel.
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These statements are based on our current plans, estimates and projections in light of information currently available to us. These forward-looking statements may be affected by risks, uncertainties and other factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under “Risk Factors.” Furthermore, new risks and uncertainties emerge from time to time, and it is impossible for us to predict all risks and uncertainties or how they may affect us. If any of these risks or uncertainties occurs, our business, revenue and financial results could be harmed, and the trading price of our Class A common stock could decline. Forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.
We intend to announce material information to the public through the CrowdStrike Investor Relations website ir.crowdstrike.com, SEC filings, press releases, public conference calls, and public webcasts. We use these channels, as well as social media and our blog, to communicate with our investors, customers, and the public about our company, our offerings, and other issues. It is possible that the information we post on social media and our blog could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including the social media channels listed on our investor relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
SUMMARY OF RISK FACTORS

Our business is subject to numerous risks and uncertainties, any one of which could materially adversely affect our business, results of operations, financial condition and growth prospects. Below is a summary of some of these risks. This summary is not complete, and should be read together with the entire section titled “Risk Factors” in this Quarterly Report on Form 10-Q, as well as the other information in this Quarterly Report on Form 10-Q and the other filings that we make with the SEC.
We have experienced rapid growth in recent periods, and if we do not manage our future growth, our business and results of operations will be adversely affected.
We have a history of losses and may not be able to achieve or sustain profitability in the future.
Our limited operating history makes it difficult to evaluate our current business and future prospects, and may increase the risk of your investment.
The COVID-19 pandemic could adversely affect global economic conditions and our business, operating results and future revenue.
If organizations do not adopt cloud-based SaaS-delivered endpoint security solutions, our ability to grow our business and results of operations may be adversely affected.
If we are unable to attract new customers, our future results of operations could be harmed.
If our customers do not renew their subscriptions for our products and add additional cloud modules to their subscriptions, our future results of operations could be harmed.
We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition, and results of operations.
If our solutions fail or are perceived to fail to detect or prevent incidents or have or are perceived to have defects, errors, or vulnerabilities, our brand and reputation would be harmed, which would adversely affect our business and results of operations.
As a cybersecurity provider, we have been, and expect to continue to be, a target of cyberattacks. If our internal networks, systems, or data are or are perceived to have been breached, our reputation may be damaged and our financial results may be negatively affected.
Our business is focused on cloud-based data analytics, and cybersecurity, privacy, and other regulations may affect how we collect and process certain types of data.
We rely on third-party data centers, such as Amazon Web Services, and our own colocation data centers, to host and operate our Falcon platform, and any disruption of or interference with our use of these facilities may
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negatively affect our ability to maintain the performance and reliability of our Falcon platform, which could cause our business to suffer.
If we do not effectively expand and train our direct sales force, we may be unable to add new customers or increase sales to our existing customers, and our business will be adversely affected.
Our results of operations may fluctuate significantly, which could make our future results difficult to predict and could cause our results of operations to fall below expectations.
Claims by others that we infringe their proprietary technology or other intellectual property rights could result in significant costs and substantially harm our business, financial condition, results of operations, and prospects.
Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our business, financial condition, and results of operations.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CrowdStrike Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
October 31,January 31,
20212021
Assets
Current assets:
Cash and cash equivalents$1,907,508 $1,918,608 
Accounts receivable, net of allowance for credit losses of $1.3 million and $1.2 million as of October 31, 2021 and January 31, 2021, respectively
283,272 239,199 
Deferred contract acquisition costs, current108,636 80,850 
Prepaid expenses and other current assets60,670 53,617 
Total current assets2,360,086 2,292,274 
Strategic investments22,665 2,500 
Property and equipment, net242,224 167,014 
Operating lease right-of-use assets33,893 36,484 
Deferred contract acquisition costs, noncurrent162,309 117,906 
Goodwill373,889 83,566 
Intangible assets, net82,870 15,677 
Other long-term assets21,681 17,112 
Total assets$3,299,617 $2,732,533 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$7,167 $12,065 
Accrued expenses76,758 51,117 
Accrued payroll and benefits94,738 71,907 
Operating lease liabilities, current9,706 8,977 
Deferred revenue974,571 701,988 
Other current liabilities78,607 17,499 
Total current liabilities1,241,547 863,553 
Long-term debt 739,145 738,029 
Deferred revenue, noncurrent313,625 209,907 
Operating lease liabilities, noncurrent27,895 31,986 
Other liabilities, noncurrent17,835 17,184 
Total liabilities2,340,047 1,860,659 
Commitments and contingencies (Note 10)
Stockholders’ Equity
Preferred stock, $0.0005 par value; 100,000 shares authorized as of October 31, 2021 and January 31, 2021; no shares issued and outstanding as of October 31, 2021 and January 31, 2021
  
Class A common stock, $0.0005 par value; 2,000,000 shares authorized as of October 31, 2021 and January 31, 2021; 208,121 shares and 195,039 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively; Class B common stock, $0.0005 par value; 300,000 shares authorized as of October 31, 2021 and January 31, 2021; 21,176 shares and 28,685 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively.
115 112 
Additional paid-in capital1,870,120 1,598,259 
Accumulated deficit(922,938)(730,116)
Accumulated other comprehensive income 885 2,319 
Total CrowdStrike Holdings, Inc. stockholders’ equity 948,182 870,574 
Non-controlling interest11,388 1,300 
Total stockholders’ equity 959,570 871,874 
Total liabilities and stockholders’ equity $3,299,617 $2,732,533 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CrowdStrike Holdings, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2021202020212020
Revenue
Subscription$357,030 $213,530 $954,094 $560,008 
Professional services23,021 18,930 66,490 49,501 
Total revenue380,051 232,460 1,020,584 609,509 
Cost of revenue
Subscription85,464 49,583 226,360 130,864 
Professional services16,200 11,944 44,241 31,949 
Total cost of revenue101,664 61,527 270,601 162,813 
Gross profit278,387 170,933 749,983 446,696 
Operating expenses
Sales and marketing164,960 105,602 453,952 288,867 
Research and development97,630 57,539 266,265 148,600 
General and administrative56,061 31,951 148,780 85,955 
Total operating expenses318,651 195,092 868,997 523,422 
Loss from operations(40,264)(24,159)(119,014)(76,726)
Interest expense(6,403)(193)(18,929)(510)
Other income, net690 272 6,077 5,537 
Loss before provision for income taxes(45,977)(24,080)(131,866)(71,699)
Provision for income taxes4,473 451 58,773 1,928 
Net loss(50,450)(24,531)(190,639)(73,627)
Net income attributable to noncontrolling interest5  2,183  
Net loss attributable to CrowdStrike $(50,455)$(24,531)$(192,822)$(73,627)
Net loss per share attributable to CrowdStrike common stockholders, basic and diluted$(0.22)$(0.11)$(0.85)$(0.34)
Weighted-average shares used in computing net loss per share attributable to CrowdStrike common stockholders, basic and diluted228,293 219,401 226,292 216,432 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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CrowdStrike Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2021202020212020
Net loss $(50,450)$(24,531)$(190,639)$(73,627)
Other comprehensive income (loss):
Foreign currency translation adjustments(665)(500)(1,434)926 
Reversal of unrealized gain upon sale of debt securities, net of tax   (1,320)
Other comprehensive loss(665)(500)(1,434)(394)
Less: Comprehensive income attributable to noncontrolling interest5  2,183  
Total comprehensive loss attributable to CrowdStrike$(51,120)$(25,031)$(194,256)$(74,021)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CrowdStrike Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
Three Months Ended October 31, 2021 and 2020
(in thousands)
(unaudited)


Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeNon-controlling InterestTotal Stockholders’ Equity
SharesAmount
Balances at July 31, 2021228,152 $114 $1,775,087 $(872,483)$1,550 $7,133 $911,401 
Issuance of common stock upon exercise of options375 — 2,580 — — — 2,580 
Issuance of common stock under RSU and PSU release759 1 (1)— — —  
Vesting of early exercised options— — 795 — — — 795 
Issuance of common stock for founders holdbacks related to acquisitions11 — 2,867 — — — 2,867 
Stock-based compensation expense— — 85,706 — — — 85,706 
Capitalized stock-based compensation— — 3,086 — — — 3,086 
Net income (loss)— — — (50,455)— 5 (50,450)
Non-controlling interest— — — — — 4,250 4,250 
Other comprehensive loss— — — — (665)— (665)
Balances at October 31, 2021229,297 $115 $1,870,120 $(922,938)$885 $11,388 $959,570 
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income Non-controlling InterestTotal Stockholders’ Equity
SharesAmount
Balances at July 31, 2020219,194 $110 $1,476,323 $(686,583)$1,115 $1,050 $792,015 
Issuance of common stock upon exercise of options1,277 1 4,920 — — — 4,921 
Issuance of common stock under RSU and PSU release483 — — — — — — 
Vesting of early exercised options— — 799 — — — 799 
Stock-based compensation expense— — 40,532 — — — 40,532 
Capitalized stock-based compensation — — 986 — — — 986 
Fair value of replacement equity awards attributable to pre-acquisition service— — 313 — — — 313 
Net loss— — — (24,531)— — (24,531)
Non-controlling interest— — — — — 250 250 
Other comprehensive loss— — — — (500)— (500)
Balances at October 31, 2020220,954 $111 $1,523,873 $(711,114)$615 $1,300 $814,785 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CrowdStrike Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
Nine Months Ended October 31, 2021 and 2020
(in thousands)
(unaudited)
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeNon-controlling InterestTotal Stockholders’ Equity
SharesAmount
Balances at January 31, 2021223,724 $112 $1,598,259 $(730,116)$2,319 $1,300 $871,874 
Issuance of common stock upon exercise of options2,136 2 12,794 — — — 12,796 
Issuance of common stock under RSU and PSU release2,680 1 (1)— — —  
Issuance of common stock under employee stock purchase plan689 — 27,452 — — — 27,452 
Issuance of common stock related to early exercised options57 — — — — — — 
Vesting of early exercised options— — 2,389 — — — 2,389 
Issuance of common stock for founders holdbacks related to acquisitions11 — 2,867 — — — 2,867 
Stock-based compensation expense— — 214,716 — — — 214,716 
Capitalized stock-based compensation— — 7,633 — — — 7,633 
Fair value of replacement equity awards attributable to pre-acquisition service— — 4,011 — — — 4,011 
Net income (loss)— — — (192,822)— 2,183 (190,639)
Non-controlling interest— — — — 7,905 7,905 
Other comprehensive loss— — — — (1,434)— (1,434)
Balances at October 31, 2021229,297 $115 $1,870,120 $(922,938)$885 $11,388 $959,570 

Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeNon-controlling InterestTotal Stockholders’ Equity
SharesAmount
Balances at January 31, 2020212,948 $106 $1,378,479 $(637,487)$1,009 $500 $742,607 
Issuance of common stock upon exercise of options5,966 5 21,517 — — — 21,522 
Issuance of common stock under RSU and PSU release1,475 — — — — — — 
Issuance of common stock under employee stock purchase plan565 — 17,284 — — — 17,284 
Vesting of early exercised options— — 2,521 — — — 2,521 
Stock-based compensation expense— — 101,883 — — — 101,883 
Capitalized stock-based compensation— — 1,876 — — — 1,876 
Fair value of replacement equity awards attributable to pre-acquisition service— — 313 — — — 313 
Net loss— — — (73,627)— — (73,627)
Non-controlling interest — — — — — 800 800 
Other comprehensive loss— — — — (394)— (394)
Balances at October 31, 2020220,954 $111 $1,523,873 $(711,114)$615 $1,300 $814,785 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CrowdStrike Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended October 31,
20212020
Operating activities
Net loss $(190,639)$(73,627)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization39,247 27,728 
Loss on disposal of property and equipment259  
Amortization of intangible assets9,072 579 
Amortization of deferred contract acquisition costs79,712 44,940 
Non-cash operating lease cost6,727 7,666 
Stock-based compensation expense217,315 101,961 
Gain on sale of debt securities, net (1,347)
Amortization of marketable securities purchased at a premium 578 
Non-cash interest expense1,824 506 
Change in fair value of strategic investments(4,356) 
Changes in operating assets and liabilities, net of impact of acquisitions
Accounts receivable, net(40,644)(6,603)
Deferred contract acquisition costs(151,901)(84,741)
Prepaid expenses and other assets(9,788)1,487 
Accounts payable(7,033)6,556 
Accrued expenses and other current liabilities81,826 1,643 
Accrued payroll and benefits22,258 18,712 
Operating lease liabilities(7,394)(1,434)
Deferred revenue375,582 189,582 
Other liabilities, noncurrent(7,001)7,917 
Net cash provided by operating activities415,066 242,103 
Investing activities
Purchases of property and equipment(85,420)(40,245)
Capitalized internal-use software and website development(15,201)(6,345)
Purchase of strategic investments(15,809)(1,500)
Business acquisitions, net of cash acquired(353,746)(85,469)
Purchase of intangible assets(680) 
Purchases of marketable securities (84,904)
Proceeds from sales of marketable securities 639,586 
Maturities of marketable securities 91,605 
Net cash (used in) provided by investing activities(470,856)512,728 
Financing activities
Payment of debt issuance costs related to revolving line of credit(219) 
Payment of debt issuance costs related to Senior Notes(1,581) 
Proceeds from issuance of common stock upon exercise of stock options12,796 21,522 
Proceeds from issuance of common stock under the employee stock purchase plan 27,452 17,284 
Capital contributions from non-controlling interest holders7,905 800 
Net cash provided by financing activities46,353 39,606 
Effect of foreign exchange rates on cash and cash equivalents(1,663)691 
Net (decrease) increase in cash and cash equivalents(11,100)795,128 
Cash and cash equivalents, beginning of period1,918,608 264,798 
Cash and cash equivalents, end of period$1,907,508 $1,059,926 
Supplemental disclosure of cash flow information:
Interest paid$235 $4 
Income taxes paid, net of refunds received3,854 1,536 
Supplemental disclosure of non-cash investing and financing activities:
Net increase in property and equipment included in accounts payable and accrued expenses7,066 4,755 
Vesting of early exercised stock options2,389 2,521 
Equity consideration for acquisitions4,011 3,842 
Operating lease liabilities arising from obtaining operating right of-use assets 4,591 6,181 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CrowdStrike Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1.    Description of Business and Basis of Presentation
Business
CrowdStrike Holdings, Inc. (the “Company”) was formed on November 7, 2011. The Company provides a leading cloud-delivered solution for next-generation endpoint and cloud workload protection via a software as a service (“SaaS”) subscription-based model that spans multiple security markets, including corporate workload security, security and vulnerability management, managed security services, IT operations management, threat intelligence services, identity protection and log management. The Company is headquartered in Sunnyvale, California. The Company conducts its business in the United States, as well as locations internationally, including in Australia, Germany, India, Israel, Romania, and the United Kingdom.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of January 31, 2021, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by U.S. GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments that are necessary for the fair statement of the Company’s condensed consolidated financial information. The results of operations for the three and nine months ended October 31, 2021 are not necessarily indicative of the results to be expected for the year ending January 31, 2022 or for any other interim period or for any other future year.
The accompanying interim unaudited condensed consolidated financial statements and related financial information should be read in conjunction with Item 8, “Financial Statements and Supplementary Data” included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 18, 2021.
2.    Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company’s condensed consolidated financial statements and accompanying notes. These estimates are based on information available as of the date of the condensed consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Actual results may differ from these estimates and such difference could be material to the Company’s condensed consolidated financial statements.

Estimates and assumptions used by management include, but are not limited to, revenue recognition, the allowance for credit losses, the useful lives of long-lived assets, the fair values of strategic investments, the period of benefit for deferred contract acquisition costs, the discount rate used for operating leases, the recognition and disclosure of contingent liabilities, income taxes, stock-based compensation, the fair value of assets acquired and liabilities assumed for business combinations, and the fair value and effective interest rate for the Senior Notes.
Due to the Coronavirus (“COVID-19”) pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require a material update to its estimates or judgments or an adjustment of the carrying value of its assets or liabilities as of October 31, 2021. While there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three and nine months ended October 31, 2021, these estimates may change, as new events occur and additional information is obtained, as well as other
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factors related to COVID-19 that could result in material impacts to the Company’s condensed consolidated financial statements in future reporting periods.
Concentration of Credit Risk and Geographic Information
The Company generates revenue from the sale of subscriptions to access its cloud platform and professional services. The Company’s sales team, along with its channel partner network of system integrators and value-added resellers (collectively, “channel partners”), sells the Company’s services worldwide to organizations of all sizes.
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, accounts receivable, and strategic investments. The Company’s cash is placed with high-credit-quality financial institutions and issuers, and at times exceed federally insured limits. The Company has not experienced any credit loss relating to its cash equivalents and strategic investments. The Company performs periodic credit evaluations of its customers and generally does not require collateral.
Channel partners or direct customers who represented 10% or more of the Company’s accounts receivable were as follows:
October 31,January 31,
20212021
Channel partner A(1)
11 %10 %
Channel partner B10 %5 %
Customer A(1)
 %17 %
_______________________________
(1)Channel Partner A and Customer A are controlled by the same company.
There were no direct customers or channel partners who represented 10% or more of the Company’s total revenue during the three and nine months ended October 31, 2021 and October 31, 2020.
Significant Accounting Policies
The Company’s significant accounting policies are described in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021. There have been no significant changes to these policies that have had a material impact on the Company’s condensed consolidated financial statements and related notes for the three and nine months ended October 31, 2021.

Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The Company adopted this guidance on February 1, 2021, which did not have a material effect on its condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on the Company’s consolidated financial statements.

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3.    Investments and Fair Value Measurements
The Company follows ASC 820, Fair Value Measurements, with respect to marketable securities that are measured at fair value on a recurring basis. Under the standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances.
The hierarchy is broken down into three levels as follows:
Level 1    Assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in active markets
Level 2    Assets and liabilities whose values are based on quoted prices in markets that are not active or inputs that are observable for substantially the full term of the asset or liability
Level 3    Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in thousands):
October 31, 2021January 31, 2021
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
Cash equivalents (1)
Money market funds$300,020 $ $ $300,020 $ $ $ $ 
Total assets$300,020 $ $ $300,020 $ $ $ $ 
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(1)Included in “Cash and cash equivalents” on the condensed consolidated balance sheets.
There were no transfers between the levels of the fair value hierarchy during the periods presented.
The following summarizes the changes in strategic investments (in thousands):
October 31,January 31,
20212021
Total initial cost$18,309 $2,500 
Unrealized gains due to changes in fair value4,356  
Carrying value$22,665 $2,500 

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4.    Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
October 31,
2021
January 31,
2021
Prepaid software licenses$21,262 $20,596 
Prepaid expenses17,068 12,220 
Prepaid marketing9,889 10,852 
Other current assets7,975 4,566 
Prepaid hosting services4,476 5,383 
Prepaid expenses and other current assets$60,670 $53,617 
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
October 31,
2021
January 31,
2021
Data center and other computer equipment$187,777 $146,220 
Capitalized internal-use software and website development60,053 44,358 
Leasehold improvements22,302 19,733 
Purchased software5,266 3,211 
Furniture and equipment7,050 6,498 
Construction in process86,832 35,528 
369,280 255,548 
Less: Accumulated depreciation and amortization(127,056)(88,534)
Property and equipment, net$242,224 $167,014 
Construction in process primarily includes data center equipment purchased that has not yet been placed in service. As of October 31, 2021, $75.8 million of data center equipment was purchased but not yet been placed into service.
Depreciation and amortization expense of property and equipment was $14.5 million and $10.1 million during the three months ended October 31, 2021 and October 31, 2020, respectively, and $39.2 million and $27.7 million during the nine months ended October 31, 2021 and October 31, 2020, respectively.
There was no impairment of website and internal-use software during the three and nine months ended October 31, 2021 and October 31, 2020. The Company capitalized $9.0 million and $3.5 million in website and internal-use software during the three months ended October 31, 2021 and October 31, 2020, and $22.8 million and $8.2 million during the nine months ended October 31, 2021 and October 31, 2020, respectively. Amortization expense associated with website and internal-use software totaled $3.3 million and $1.9 million during the three months ended October 31, 2021 and October 31, 2020, respectively, and $8.6 million and $5.6 million during the nine months ended October 31, 2021 and October 31, 2020, respectively. The net book value of capitalized website and internal-use software was $34.5 million and $20.1 million as of October 31, 2021 and January 31, 2021, respectively.
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Intangible Assets, Net
Total intangible assets, net consisted of the following (dollar in thousands):
October 31, 2021Weighted-Average
Remaining 
Useful
Life
Gross Carrying AmountAccumulated AmortizationNet Amount
(in months)
Developed technology$82,396 $8,822 $73,574 84
Customer relationships9,068 1,556 7,512 74