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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 July 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 August 25, 2021, the number of shares of the registrant’s Class A common stock outstanding was 205,834,483, and the number of shares of the registrant’s Class B common stock outstanding was 22,358,088.



Table of Contents
CROWDSTRIKE HOLDINGS, INC.
TABLE OF CONTENTS
Page No.

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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)
July 31,January 31,
20212021
Assets
Current assets:
Cash and cash equivalents$1,787,051 $1,918,608 
Accounts receivable, net of allowance for credit losses of $1.4 million and $1.2 million as of July 31, 2021 and January 31, 2021, respectively
266,540 239,199 
Deferred contract acquisition costs, current95,470 80,850 
Prepaid expenses and other current assets102,964 53,617 
Total current assets2,252,025 2,292,274 
Strategic investments14,165 2,500 
Property and equipment, net215,832 167,014 
Operating lease right-of-use assets34,854 36,484 
Deferred contract acquisition costs, noncurrent140,443 117,906 
Goodwill374,310 83,566 
Intangible assets, net85,580 15,677 
Other long-term assets18,836 17,112 
Total assets$3,136,045 $2,732,533 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable19,642 12,065 
Accrued expenses70,162 51,117 
Accrued payroll and benefits95,462 71,907 
Operating lease liabilities, current9,374 8,977 
Deferred revenue882,969 701,988 
Other current liabilities59,219 17,499 
Total current liabilities1,136,828 863,553 
Long-term debt 738,772 738,029 
Deferred revenue, noncurrent281,388 209,907 
Operating lease liabilities, noncurrent29,378 31,986 
Other liabilities, noncurrent38,278 17,184 
Total liabilities2,224,644 1,860,659 
Commitments and contingencies (Note 10)
Stockholders’ Equity
Preferred stock, $0.0005 par value; 100,000 shares authorized as of July 31, 2021 and January 31, 2021; no shares issued and outstanding as of July 31, 2021 and January 31, 2021
  
Class A common stock, $0.0005 par value; 2,000,000 shares authorized as of July 31, 2021 and January 31, 2021; 205,736 shares and 195,039 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively; Class B common stock, $0.0005 par value; 300,000 shares authorized as of July 31, 2021 and January 31, 2021; 22,416 shares and 28,685 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively.
114 112 
Additional paid-in capital1,775,087 1,598,259 
Accumulated deficit(872,483)(730,116)
Accumulated other comprehensive income 1,550 2,319 
Total CrowdStrike Holdings, Inc. stockholders’ equity 904,268 870,574 
Non-controlling interest7,133 1,300 
Total stockholders’ equity 911,401 871,874 
Total liabilities and stockholders’ equity $3,136,045 $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 July 31,Six Months Ended July 31,
2021202020212020
Revenue
Subscription$315,836 $184,256 $597,064 $346,478 
Professional services21,854 14,715 43,469 30,571 
Total revenue337,690 198,971 640,533 377,049 
Cost of revenue
Subscription75,993 44,037 140,896 81,281 
Professional services14,439 10,354 28,041 20,005 
Total cost of revenue90,432 54,391 168,937 101,286 
Gross profit247,258 144,580 471,596 275,763 
Operating expenses
Sales and marketing153,861 95,127 288,992 183,265 
Research and development90,455 50,483 168,635 91,061 
General and administrative50,345 28,961 92,719 54,004 
Total operating expenses294,661 174,571 550,346 328,330 
Loss from operations(47,403)(29,991)(78,750)(52,567)
Interest expense(6,296)(174)(12,526)(317)
Other income, net619 732 5,387 5,265 
Loss before provision for income taxes(53,080)(29,433)(85,889)(47,619)
Provision for income taxes4,238 441 54,300 1,477 
Net loss(57,318)(29,874)(140,189)(49,096)
Net income attributable to noncontrolling interest  2,178  
Net loss attributable to CrowdStrike $(57,318)$(29,874)$(142,367)$(49,096)
Net loss per share attributable to CrowdStrike common stockholders, basic and diluted$(0.25)$(0.14)$(0.63)$(0.23)
Weighted-average shares used in computing net loss per share attributable to CrowdStrike common stockholders, basic and diluted226,362 216,695 225,276 214,932 
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 July 31,Six Months Ended July 31,
2021202020212020
Net loss $(57,318)$(29,874)$(140,189)$(49,096)
Other comprehensive income (loss):
Foreign currency translation adjustments(567)2,119 (769)1,426 
Reversal of unrealized gain upon sale of debt securities, net of tax   (1,320)
Other comprehensive income (loss)(567)2,119 (769)106 
Less: Comprehensive income attributable to noncontrolling interest  2,178  
Total comprehensive loss attributable to CrowdStrike$(57,885)$(27,755)$(143,136)$(48,990)
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 July 31, 2021 and 2020
(in thousands)
(unaudited)


Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeNon-controlling InterestTotal Stockholders’ Equity
SharesAmount
Balances at April 30, 2021225,743 $113 $1,662,199 $(815,165)$2,117 $4,133 $853,397 
Issuance of common stock upon exercise of options992 1 6,461 — — — 6,462 
Issuance of common stock under RSU release728 — — — — — — 
Issuance of common stock under employee stock purchase plan689 — 27,452 — — — 27,452 
Vesting of early exercised options— — 797 — — — 797 
Stock-based compensation expense— — 75,364 — — — 75,364 
Capitalized stock-based compensation— — 2,814 — — — 2,814 
Net loss— — — (57,318)— — (57,318)
Non-controlling interest— — — — — 3,000 3,000 
Other comprehensive loss— — — — (567)— (567)
Balances at July 31, 2021228,152 $114 $1,775,087 $(872,483)$1,550 $7,133 $911,401 
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeNon-controlling InterestTotal Stockholders’ Equity
SharesAmount
Balances at April 30, 2020215,505 $108 $1,409,758 $(656,709)$(1,004)$1,000 $753,153 
Issuance of common stock upon exercise of options2,633 2 10,206 — — — 10,208 
Issuance of common stock under RSU release491 — — — — — — 
Issuance of common stock under employee stock purchase plan565 — 17,284 — — — 17,284 
Vesting of early exercised options— — 849 — — — 849 
Stock-based compensation expense— — 37,713 — — — 37,713 
Capitalized stock-based compensation — — 513 — — — 513 
Net loss— — — (29,874)— — (29,874)
Non-controlling interest— — — — — 50 50 
Other comprehensive income— — — — 2,119 — 2,119 
Balances at July 31, 2020219,194 $110 $1,476,323 $(686,583)$1,115 $1,050 $792,015 
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
Six Months Ended July 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 options1,761 2 10,214 — — — 10,216 
Issuance of common stock under RSU release1,921 — — — — — — 
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— — 1,594 — — — 1,594 
Stock-based compensation expense— — 129,010 — — — 129,010 
Capitalized stock-based compensation— — 4,547 — — — 4,547 
Fair value of replacement equity awards attributable to pre-acquisition service— — 4,011 — — — 4,011 
Net loss— — — (142,367)— 2,178 (140,189)
Non-controlling interest— — — — 3,655 3,655 
Other comprehensive loss— — — — (769)— (769)
Balances at July 31, 2021228,152 $114 $1,775,087 $(872,483)$1,550 $7,133 $911,401 

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 options4,689 4 16,597 — — — 16,601 
Issuance of common stock under RSU release992 — — — — — — 
Issuance of common stock under employee stock purchase plan565 — 17,284 — — — 17,284 
Vesting of early exercised options— — 1,722 — — — 1,722 
Stock-based compensation expense— — 61,351 — — — 61,351 
Capitalized stock-based compensation— — 890 — — — 890 
Net loss— — — (49,096)— — (49,096)
Non-controlling interest — — — — — 550 550 
Other comprehensive loss— — — — 106 — 106 
Balances at July 31, 2020219,194 $110 $1,476,323 $(686,583)$1,115 $1,050 $792,015 
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)
Six Months Ended July 31,
20212020
Operating activities
Net loss $(140,189)$(49,096)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization24,725 17,621 
Loss on disposal of property and equipment244  
Amortization of intangible assets5,735 207 
Amortization of deferred contract acquisition costs50,419 28,171 
Non-cash operating lease cost4,469 4,939 
Provision for credit losses354 (269)
Stock-based compensation expense130,649 61,351 
Gain on sale of debt securities, net (1,347)
Accretion of marketable securities purchased at a premium  578 
Non-cash interest expense1,199 320 
Change in fair value of strategic investments(4,356) 
Changes in operating assets and liabilities, net of impact of acquisition
Accounts receivable(24,257)16,020 
Deferred contract acquisition costs(87,576)(48,988)
Prepaid expenses and other assets(47,883)(1,953)
Accounts payable5,383 9,634 
Accrued expenses and other current liabilities55,242 (8,112)
Accrued payroll and benefits22,853 (711)
Operating lease liabilities(5,022)1,315 
Deferred revenue251,742 118,672 
Other liabilities12,277 5,250 
Net cash provided by operating activities256,008 153,602 
Investing activities
Purchases of property and equipment(55,793)(30,334)
Capitalized internal-use software and website development(9,273)(3,850)
Purchase of strategic investments(7,309)(1,000)
Business acquisition, net of cash acquired(353,746) 
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(426,121)611,103 
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 options9,492 16,601 
Proceeds from issuance of common stock under the employee stock purchase plan 27,452 17,284 
Capital contributions from non-controlling interest holders3,655 550 
Net cash provided by financing activities38,799 34,435 
Effect of foreign exchange rates on cash and cash equivalents(243)796 
Net (decrease) increase in cash and cash equivalents(131,557)799,936 
Cash and cash equivalents, beginning of period1,918,608 264,798 
Cash and cash equivalents, end of period$1,787,051 $1,064,734 
Supplemental disclosure of cash flow information:
Interest paid$78 $ 
Income taxes paid, net of refunds received2,337 663 
Supplemental disclosure of non-cash investing and financing activities:
Net increase (decrease) in property and equipment included in accounts payable and accrued expenses4,480 (1,020)
Vesting of early exercised stock options1,594 1,722 
Equity consideration for acquisitions4,011  
Operating lease liabilities arising from obtaining operating right of-use assets 3,121  
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 that offers 19 cloud modules and its Falcon platform 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 six months ended July 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.
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.
Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable required disclosures and regulations of the SEC. Therefore, 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.
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.
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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 July 31, 2021. While there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three and six months ended July 31, 2021, these estimates may change, as new events occur and additional information is obtained, as well as other 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:
July 31,January 31,
20212021
Channel partner A(1)
14 %10 %
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 six months ended July 31, 2021 and July 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 six months ended July 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.
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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):
July 31, 2021January 31, 2021
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
Cash equivalents (1)
Money market funds$396,011 $ $ $396,011 $ $ $ $ 
Total assets$396,011 $ $ $396,011 $ $ $ $ 
__________________________________
(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):
July 31,January 31,
20212021
Total initial cost$9,809 $2,500 
Unrealized gains due to changes in fair value4,356  
Carrying value$14,165 $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):
July 31,
2021
January 31,
2021
Other current assets$38,178 $4,566 
Prepaid marketing23,104 10,852 
Prepaid software licenses17,785 20,596 
Prepaid expenses19,008 12,220 
Prepaid hosting services4,889 5,383 
Prepaid expenses and other current assets$102,964 $53,617 
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
July 31,
2021
January 31,
2021
Data center and other computer equipment$175,359 $146,220 
Capitalized internal-use software and website development54,839 44,358 
Leasehold improvements19,319 19,733 
Purchased software5,219 3,211 
Furniture and equipment6,469 6,498 
Construction in process67,602 35,528 
328,807 255,548 
Less: Accumulated depreciation and amortization(112,975)(88,534)
Property and equipment, net$215,832 $167,014 
Construction in process primarily includes data center equipment purchased that has not yet been placed in service. As of July 31, 2021, $57.4 million of data center equipment was purchased but not yet been placed into service.
Depreciation and amortization expense of property and equipment was $12.7 million and $9.4 million during the three months ended July 31, 2021 and July 31, 2020, respectively, and $24.7 million and $17.6 million during the six months ended July 31, 2021 and July 31, 2020, respectively.
There was no impairment of website and internal-use software during the three and six months ended July 31, 2021 and July 31, 2020. The Company capitalized $7.6 million and $2.4 million in website and internal-use software during the three months ended July 31, 2021 and July 31, 2020, and $13.8 million and $4.7 million during the six months ended July 31, 2021 and July 31, 2020, respectively. Amortization expense associated with website and internal-use software totaled $2.8 million and $1.8 million during the three months ended July 31, 2021 and July 31, 2020, respectively, and $5.3 million and $3.7 million during the six months ended July 31, 2021 and July 31, 2020, respectively. The net book value of capitalized website and internal-use software was $28.8 million and $20.1 million as of July 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):
July 31, 2021Weighted-Average
Remaining 
Useful
Life
Gross Carrying AmountAccumulated AmortizationNet Amount
(in months)
Developed technology$82,416 $6,062 $76,354 87
Customer relationships9,084 1,215 7,869 77
Other acquired intangible assets1,774 417 1,357 55
Total$93,274 $7,694 $85,580 
January 31, 2021Weighted-Average
Remaining 
Useful
Life
Gross Carrying AmountAccumulated AmortizationNet Amount
(in months)
Developed technology$14,513 $2,193 $12,320 56
Customer relationships3,769 649 3,120 54
Other acquired intangible assets399 162