☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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100 First Street, Suite 600
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26-4175727
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(State or Other Jurisdiction of
Incorporation or Organization)
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San Francisco
|
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(I.R.S. Employer
Identification Number)
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California
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94105
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(Address of Principal executive offices)
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Title of each class
|
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Trading Symbol(s)
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Name of each exchange on which registered
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Class A common stock, par value $0.0001 per share
|
|
OKTA
|
|
The NASDAQ Stock Market LLC
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page No.
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•
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our future financial performance, including our revenue, costs of revenue, gross profits, margins and operating expenses;
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•
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trends in our key business metrics;
|
•
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the sufficiency of our cash and cash equivalents, investments and cash provided by sales of our products and services to meet our liquidity needs;
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•
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market or other opportunities arising from business combinations; and
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•
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the impact of recent accounting pronouncements on our financial statements.
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October 31, 2019
|
|
January 31, 2019
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||||
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|
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As Adjusted (1)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,039,626
|
|
|
$
|
298,394
|
|
Short-term investments
|
326,629
|
|
|
265,374
|
|
||
Accounts receivable, net of allowances of $1,146 and $2,098
|
101,778
|
|
|
91,926
|
|
||
Deferred commissions
|
29,544
|
|
|
24,185
|
|
||
Prepaid expenses and other current assets
|
29,023
|
|
|
28,237
|
|
||
Total current assets
|
1,526,600
|
|
|
708,116
|
|
||
Property and equipment, net
|
51,730
|
|
|
52,921
|
|
||
Operating lease right-of-use assets
|
126,746
|
|
|
121,389
|
|
||
Deferred commissions, noncurrent
|
65,466
|
|
|
54,812
|
|
||
Intangible assets, net
|
33,826
|
|
|
13,897
|
|
||
Goodwill
|
47,964
|
|
|
18,089
|
|
||
Other assets
|
18,445
|
|
|
15,089
|
|
||
Total assets
|
$
|
1,870,777
|
|
|
$
|
984,313
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|||
Current liabilities:
|
|
|
|
|
|||
Accounts payable
|
$
|
4,924
|
|
|
$
|
2,431
|
|
Accrued expenses and other current liabilities
|
33,288
|
|
|
33,653
|
|
||
Accrued compensation
|
34,212
|
|
|
19,770
|
|
||
2023 Convertible senior notes, net
|
99,227
|
|
|
271,628
|
|
||
Deferred revenue
|
306,743
|
|
|
245,622
|
|
||
Total current liabilities
|
478,394
|
|
|
573,104
|
|
||
2025 Convertible senior notes, net
|
828,237
|
|
|
—
|
|
||
Operating lease liabilities, noncurrent
|
153,960
|
|
|
147,046
|
|
||
Deferred revenue, noncurrent
|
7,013
|
|
|
8,768
|
|
||
Other liabilities, noncurrent
|
4,779
|
|
|
3,018
|
|
||
Total liabilities
|
1,472,383
|
|
|
731,936
|
|
||
Commitments and contingencies (Note 11)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
|
|||
Preferred stock, par value $0.0001 per share; 100,000 shares authorized, no shares issued and outstanding as of October 31, 2019 and January 31, 2019.
|
—
|
|
|
—
|
|
||
Class A Common stock, par value $0.0001 per share; 1,000,000 shares authorized as of October 31, 2019 and January 31, 2019; 112,251 and 101,093 shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively.
|
11
|
|
|
10
|
|
||
Class B Common stock, par value $0.0001 per share; 120,000 shares authorized as of October 31, 2019 and January 31, 2019; 8,880 and 11,059 shares issued and outstanding as of October 31, 2019 and January 31, 2019, respectively.
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
1,048,899
|
|
|
744,896
|
|
||
Accumulated other comprehensive income (loss)
|
135
|
|
|
(319
|
)
|
||
Accumulated deficit
|
(650,652
|
)
|
|
(492,211
|
)
|
||
Total stockholders’ equity
|
398,394
|
|
|
252,377
|
|
||
Total liabilities and stockholders' equity
|
$
|
1,870,777
|
|
|
$
|
984,313
|
|
(1)
|
Adjusted for adoption of ASC 842, Leases. See Note 2.
|
|
Three Months Ended
October 31, |
|
Nine Months Ended
October 31, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Subscription
|
$
|
144,517
|
|
|
$
|
97,698
|
|
|
$
|
394,174
|
|
|
$
|
262,393
|
|
Professional services and other
|
8,520
|
|
|
7,878
|
|
|
24,566
|
|
|
21,390
|
|
||||
Total revenue
|
153,037
|
|
|
105,576
|
|
|
418,740
|
|
|
283,783
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
||||||
Subscription
|
30,124
|
|
|
20,265
|
|
|
82,581
|
|
|
55,808
|
|
||||
Professional services and other
|
10,700
|
|
|
9,435
|
|
|
32,118
|
|
|
26,227
|
|
||||
Total cost of revenue
|
40,824
|
|
|
29,700
|
|
|
114,699
|
|
|
82,035
|
|
||||
Gross profit
|
112,213
|
|
|
75,876
|
|
|
304,041
|
|
|
201,748
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||
Research and development
|
41,832
|
|
|
27,596
|
|
|
115,909
|
|
|
72,354
|
|
||||
Sales and marketing
|
87,224
|
|
|
56,911
|
|
|
247,721
|
|
|
165,408
|
|
||||
General and administrative
|
28,887
|
|
|
19,848
|
|
|
81,540
|
|
|
55,873
|
|
||||
Total operating expenses
|
157,943
|
|
|
104,355
|
|
|
445,170
|
|
|
293,635
|
|
||||
Operating loss
|
(45,730
|
)
|
|
(28,479
|
)
|
|
(141,129
|
)
|
|
(91,887
|
)
|
||||
Interest expense
|
(7,826
|
)
|
|
(4,118
|
)
|
|
(16,371
|
)
|
|
(10,893
|
)
|
||||
Other income, net
|
4,982
|
|
|
2,413
|
|
|
11,346
|
|
|
6,211
|
|
||||
Loss on early extinguishment of debt
|
(14,572
|
)
|
|
—
|
|
|
(14,572
|
)
|
|
—
|
|
||||
Interest expense and other income, net
|
(17,416
|
)
|
|
(1,705
|
)
|
|
(19,597
|
)
|
|
(4,682
|
)
|
||||
Loss before provision for (benefit from) income taxes
|
(63,146
|
)
|
|
(30,184
|
)
|
|
(160,726
|
)
|
|
(96,569
|
)
|
||||
Provision for (benefit from) income taxes
|
349
|
|
|
(667
|
)
|
|
(2,285
|
)
|
|
(1,883
|
)
|
||||
Net loss
|
$
|
(63,495
|
)
|
|
$
|
(29,517
|
)
|
|
$
|
(158,441
|
)
|
|
$
|
(94,686
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss per share, basic and diluted
|
$
|
(0.53
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(0.89
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted-average shares used to compute net loss per share, basic and diluted
|
118,976
|
|
|
108,776
|
|
|
115,598
|
|
|
106,587
|
|
|
Three Months Ended
October 31, |
|
Nine Months Ended
October 31, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(63,495
|
)
|
|
$
|
(29,517
|
)
|
|
$
|
(158,441
|
)
|
|
$
|
(94,686
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Net change in unrealized gains or losses on available-for-sale securities
|
227
|
|
|
4
|
|
|
616
|
|
|
(44
|
)
|
||||
Foreign currency translation adjustments
|
1,561
|
|
|
(442
|
)
|
|
(162
|
)
|
|
(1,265
|
)
|
||||
Other comprehensive income (loss)
|
1,788
|
|
|
(438
|
)
|
|
454
|
|
|
(1,309
|
)
|
||||
Comprehensive loss
|
$
|
(61,707
|
)
|
|
$
|
(29,955
|
)
|
|
$
|
(157,987
|
)
|
|
$
|
(95,995
|
)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
October 31, |
|
Nine Months Ended
October 31, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Common stock and additional paid-in capital:
|
|
|
|
|
|
|
|
||||||||
Balance, beginning of period
|
$
|
839,535
|
|
|
$
|
677,508
|
|
|
$
|
744,907
|
|
|
$
|
565,663
|
|
Issuance of common stock upon exercise of stock options and other activity, net
|
9,430
|
|
|
7,646
|
|
|
46,911
|
|
|
36,800
|
|
||||
Issuance of common stock for settlement of RSUs
|
—
|
|
|
—
|
|
|
2,809
|
|
|
—
|
|
||||
Stock-based compensation
|
36,180
|
|
|
21,667
|
|
|
90,518
|
|
|
54,327
|
|
||||
Equity component of convertible senior notes, net of issuance costs
|
217,347
|
|
|
—
|
|
|
217,347
|
|
|
77,631
|
|
||||
Equity component of early extinguishment of 2023 convertible senior notes
|
(26,713
|
)
|
|
—
|
|
|
(26,713
|
)
|
|
—
|
|
||||
Purchases of hedges related to 2023 convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
(80,040
|
)
|
||||
Proceeds from hedges related to 2023 convertible senior notes
|
405,851
|
|
|
—
|
|
|
405,851
|
|
|
—
|
|
||||
Issuance of warrants related to 2023 convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
52,440
|
|
||||
Payments for warrants related to 2023 convertible senior notes
|
(358,622
|
)
|
|
—
|
|
|
(358,622
|
)
|
|
—
|
|
||||
Purchases of capped calls related to 2025 convertible senior notes
|
(74,094
|
)
|
|
—
|
|
|
(74,094
|
)
|
|
—
|
|
||||
Other, net
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
||||
Balance, end of period
|
1,048,911
|
|
|
706,821
|
|
|
1,048,911
|
|
|
706,821
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||
Accumulated deficit:
|
|
|
|
|
|
|
|
|
|
||||||
Balance, beginning of period
|
(587,157
|
)
|
|
(431,883
|
)
|
|
(492,211
|
)
|
|
(366,714
|
)
|
||||
Net loss
|
(63,495
|
)
|
|
(29,517
|
)
|
|
(158,441
|
)
|
|
(94,686
|
)
|
||||
Balance, end of period
|
(650,652
|
)
|
|
(461,400
|
)
|
|
(650,652
|
)
|
|
(461,400
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
||||||
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
||||||
Balance, beginning of period
|
(1,653
|
)
|
|
(480
|
)
|
|
(319
|
)
|
|
391
|
|
||||
Other comprehensive income (loss)
|
1,788
|
|
|
(438
|
)
|
|
454
|
|
|
(1,309
|
)
|
||||
Balance, end of period
|
135
|
|
|
(918
|
)
|
|
135
|
|
|
(918
|
)
|
||||
Total stockholder’s equity
|
$
|
398,394
|
|
|
$
|
244,503
|
|
|
$
|
398,394
|
|
|
$
|
244,503
|
|
|
Nine Months Ended
October 31, |
||||||
|
2019
|
|
2018
|
||||
|
|
As Adjusted (1)
|
|||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(158,441
|
)
|
|
$
|
(94,686
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Stock-based compensation
|
89,691
|
|
|
53,899
|
|
||
Depreciation, amortization and accretion
|
12,336
|
|
|
5,824
|
|
||
Amortization of debt discount and issuance costs
|
15,653
|
|
|
10,315
|
|
||
Amortization of deferred commissions
|
20,541
|
|
|
14,963
|
|
||
Deferred income taxes
|
(3,069
|
)
|
|
(2,269
|
)
|
||
Non-cash charitable contributions
|
1,162
|
|
|
1,008
|
|
||
Loss on early extinguishment of debt
|
14,572
|
|
|
—
|
|
||
Other
|
84
|
|
|
153
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(9,393
|
)
|
|
(17,539
|
)
|
||
Deferred commissions
|
(36,641
|
)
|
|
(25,907
|
)
|
||
Prepaid expenses and other assets
|
(1,518
|
)
|
|
(2,822
|
)
|
||
Operating lease right-of-use assets
|
7,851
|
|
|
12,209
|
|
||
Accounts payable
|
1,962
|
|
|
(334
|
)
|
||
Accrued compensation
|
17,352
|
|
|
7,973
|
|
||
Accrued expenses and other liabilities
|
4,017
|
|
|
1,859
|
|
||
Operating lease liabilities
|
(4,128
|
)
|
|
(5,614
|
)
|
||
Deferred revenue
|
58,737
|
|
|
46,036
|
|
||
Net cash provided by operating activities
|
30,768
|
|
|
5,068
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Capitalization of internal-use software costs
|
(2,659
|
)
|
|
(2,329
|
)
|
||
Purchases of property and equipment
|
(9,980
|
)
|
|
(14,253
|
)
|
||
Purchases of securities available for sale and other
|
(321,462
|
)
|
|
(478,138
|
)
|
||
Proceeds from maturities of securities available for sale
|
244,393
|
|
|
219,650
|
|
||
Proceeds from sales of securities available for sale and other
|
17,329
|
|
|
12,470
|
|
||
Purchases of intangible assets
|
(8,500
|
)
|
|
—
|
|
||
Payments for business acquisition, net of cash acquired
|
(44,223
|
)
|
|
(15,616
|
)
|
||
Net cash used in investing activities
|
(125,102
|
)
|
|
(278,216
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|||
Proceeds from issuance of convertible senior notes, net of issuance costs
|
1,040,760
|
|
|
334,980
|
|
||
Payments for repurchases of 2023 convertible senior notes
|
(224,414
|
)
|
|
—
|
|
||
Purchases of hedges related to 2023 convertible senior notes
|
—
|
|
|
(80,040
|
)
|
||
Proceeds from hedges related to 2023 convertible senior notes
|
405,851
|
|
|
—
|
|
||
Proceeds from issuance of warrants related to 2023 convertible senior notes
|
—
|
|
|
52,440
|
|
||
Payments for warrants related to 2023 convertible senior notes
|
(358,622
|
)
|
|
—
|
|
||
Purchases of capped calls related to 2025 convertible senior notes
|
(74,094
|
)
|
|
—
|
|
||
Proceeds from stock option exercises, net of repurchases
|
36,371
|
|
|
28,524
|
|
||
Proceeds from shares issued in connection with employee stock purchase plan
|
9,005
|
|
|
6,654
|
|
||
Other, net
|
(126
|
)
|
|
(206
|
)
|
||
Net cash provided by financing activities
|
834,731
|
|
|
342,352
|
|
||
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash
|
(241
|
)
|
|
(990
|
)
|
||
Net increase in cash, cash equivalents and restricted cash
|
740,156
|
|
|
68,214
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
311,215
|
|
|
136,233
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
1,051,371
|
|
|
$
|
204,447
|
|
|
|
|
|
||||
Supplementary cash flow disclosure:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest
|
$
|
862
|
|
|
$
|
403
|
|
Income taxes
|
845
|
|
|
395
|
|
||
Non-cash investing and financing activities:
|
|
|
|
||||
Issuance of common stock for repurchases of 2023 convertible senior notes
|
380,406
|
|
|
—
|
|
||
Vesting of early exercised common stock options
|
370
|
|
|
629
|
|
||
Common stock issued as charitable contribution
|
1,162
|
|
|
1,008
|
|
||
Operating lease right-of-use assets exchanged for lease obligations
|
14,957
|
|
|
126,088
|
|
||
Property and equipment acquired through tenant improvement allowance
|
1,682
|
|
|
22,237
|
|
||
Property and equipment and other accrued but not yet paid
|
927
|
|
|
1,431
|
|
||
Bonus settled through the issuance of common stock
|
2,809
|
|
|
—
|
|
||
Debt issuance costs, accrued but not yet paid
|
101
|
|
|
—
|
|
||
Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,039,626
|
|
|
$
|
195,898
|
|
Restricted cash, current included in prepaid expenses and other current assets
|
307
|
|
|
—
|
|
||
Restricted cash, noncurrent included in other assets
|
11,438
|
|
|
8,549
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
1,051,371
|
|
|
$
|
204,447
|
|
|
|
|
|
(1)
|
Adjusted for adoption of ASC 842, Leases. See Note 2.
|
•
|
whether contractual arrangements that expired prior to or existed as of February 1, 2017, are or contain leases,
|
•
|
the classification of leases that expired prior to or existed as of February 1, 2017, and
|
•
|
initial direct costs for leases that existed as of February 1, 2017.
|
|
As of January 31, 2019
|
||||||||||
|
As Reported
|
|
Adoption of ASC 842
|
|
As Adjusted
|
||||||
|
(unaudited)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
$
|
29,451
|
|
|
$
|
(1,214
|
)
|
|
$
|
28,237
|
|
Total current assets
|
709,330
|
|
|
(1,214
|
)
|
|
708,116
|
|
|||
Operating lease right-of-use assets
|
—
|
|
|
121,389
|
|
|
121,389
|
|
|||
Other noncurrent assets
|
15,286
|
|
|
(197
|
)
|
|
15,089
|
|
|||
Total assets
|
$
|
864,335
|
|
|
$
|
119,978
|
|
|
$
|
984,313
|
|
|
|
|
|
|
|
||||||
Liabilities and stockholders’ equity
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Accrued expenses and other liabilities
|
$
|
24,740
|
|
|
$
|
8,913
|
|
|
$
|
33,653
|
|
Total current liabilities
|
564,191
|
|
|
8,913
|
|
|
573,104
|
|
|||
Other noncurrent liabilities
|
38,999
|
|
|
(35,981
|
)
|
|
3,018
|
|
|||
Operating lease liabilities, noncurrent
|
—
|
|
|
147,046
|
|
|
147,046
|
|
|||
Total liabilities
|
611,958
|
|
|
119,978
|
|
|
731,936
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
864,335
|
|
|
$
|
119,978
|
|
|
$
|
984,313
|
|
|
As of October 31, 2019
|
||||||||||||||
|
Amortized
Cost
|
|
Unrealized
Gain
|
|
Unrealized
Loss
|
|
Estimated
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(unaudited)
|
||||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
989,029
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
989,029
|
|
Total cash equivalents
|
989,029
|
|
|
—
|
|
|
—
|
|
|
989,029
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities
|
167,266
|
|
|
265
|
|
|
—
|
|
|
167,531
|
|
||||
Corporate debt securities
|
158,769
|
|
|
330
|
|
|
(1
|
)
|
|
159,098
|
|
||||
Total short-term investments
|
326,035
|
|
|
595
|
|
|
(1
|
)
|
|
326,629
|
|
||||
Total
|
$
|
1,315,064
|
|
|
$
|
595
|
|
|
$
|
(1
|
)
|
|
$
|
1,315,658
|
|
|
As of January 31, 2019
|
||||||||||||||
|
Amortized
Cost
|
|
Unrealized
Gain
|
|
Unrealized
Loss
|
|
Estimated
Fair Value
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
247,426
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
247,426
|
|
Corporate debt securities
|
3,409
|
|
|
—
|
|
|
(1
|
)
|
|
3,408
|
|
||||
Total cash equivalents
|
250,835
|
|
|
—
|
|
|
(1
|
)
|
|
250,834
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. treasury securities
|
195,913
|
|
|
37
|
|
|
(53
|
)
|
|
195,897
|
|
||||
Corporate debt securities
|
69,483
|
|
|
13
|
|
|
(19
|
)
|
|
69,477
|
|
||||
Total short-term investments
|
265,396
|
|
|
50
|
|
|
(72
|
)
|
|
265,374
|
|
||||
Total
|
$
|
516,231
|
|
|
$
|
50
|
|
|
$
|
(73
|
)
|
|
$
|
516,208
|
|
|
As of October 31, 2019
|
|
As of January 31, 2019
|
||||||||||||
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
(unaudited)
|
|
|
|
|
||||||||||
Due within one year
|
$
|
326,035
|
|
|
$
|
326,629
|
|
|
$
|
265,396
|
|
|
$
|
265,374
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2019
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(unaudited)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
989,029
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
989,029
|
|
Corporate debt securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total cash equivalents
|
989,029
|
|
|
—
|
|
|
—
|
|
|
989,029
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities
|
—
|
|
|
167,531
|
|
|
—
|
|
|
167,531
|
|
||||
Corporate debt securities
|
—
|
|
|
159,098
|
|
|
—
|
|
|
159,098
|
|
||||
Total short-term investments
|
—
|
|
|
326,629
|
|
|
—
|
|
|
326,629
|
|
||||
Total cash equivalents and short-term investments
|
$
|
989,029
|
|
|
$
|
326,629
|
|
|
$
|
—
|
|
|
$
|
1,315,658
|
|
|
As of January 31, 2019
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
247,426
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
247,426
|
|
Corporate debt securities
|
—
|
|
|
3,408
|
|
|
—
|
|
|
3,408
|
|
||||
Total cash equivalents
|
247,426
|
|
|
3,408
|
|
|
—
|
|
|
250,834
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities
|
—
|
|
|
195,897
|
|
|
—
|
|
|
195,897
|
|
||||
Corporate debt securities
|
—
|
|
|
69,477
|
|
|
—
|
|
|
69,477
|
|
||||
Total short-term investments
|
—
|
|
|
265,374
|
|
|
—
|
|
|
265,374
|
|
||||
Total cash equivalents and short-term investments
|
$
|
247,426
|
|
|
$
|
268,782
|
|
|
$
|
—
|
|
|
$
|
516,208
|
|
|
As of October 31, 2019
|
||||||
|
Net Carrying Amount (1)
|
|
Estimated
Fair Value
|
||||
|
|
|
|
||||
|
(unaudited)
|
||||||
2023 Convertible senior notes
|
$
|
101,190
|
|
|
$
|
279,764
|
|
2025 Convertible senior notes
|
$
|
843,265
|
|
|
$
|
1,006,406
|
|
(1)
|
Before unamortized debt issuance costs.
|
|
As of October 31, 2019
|
||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
|
|
|
|
|
|
||||||
|
(unaudited)
|
||||||||||
Capitalized internal-use software costs
|
$
|
23,264
|
|
|
$
|
(13,592
|
)
|
|
$
|
9,672
|
|
Purchased developed technology
|
28,800
|
|
|
(4,728
|
)
|
|
24,072
|
|
|||
Software licenses
|
1,023
|
|
|
(941
|
)
|
|
82
|
|
|||
|
$
|
53,087
|
|
|
$
|
(19,261
|
)
|
|
$
|
33,826
|
|
|
As of January 31, 2019
|
||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
Capitalized internal-use software costs
|
$
|
19,838
|
|
|
$
|
(9,969
|
)
|
|
$
|
9,869
|
|
Purchased developed technology
|
4,600
|
|
|
(833
|
)
|
|
3,767
|
|
|||
Software licenses
|
1,023
|
|
|
(763
|
)
|
|
260
|
|
|||
|
$
|
25,461
|
|
|
$
|
(11,565
|
)
|
|
$
|
13,896
|
|
•
|
during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2018 (and only during such fiscal quarter), if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2023 Notes on each applicable trading day;
|
•
|
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day; or
|
•
|
upon the occurrence of specified corporate events, as described in the Indenture.
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(unaudited)
|
||||||||||||||
Contractual interest expense
|
$
|
99
|
|
|
$
|
215
|
|
|
$
|
530
|
|
|
$
|
577
|
|
Amortization of debt issuance costs
|
214
|
|
|
299
|
|
|
862
|
|
|
777
|
|
||||
Amortization of debt discount
|
2,403
|
|
|
3,604
|
|
|
9,868
|
|
|
9,539
|
|
||||
Total
|
$
|
2,716
|
|
|
$
|
4,118
|
|
|
$
|
11,260
|
|
|
$
|
10,893
|
|
|
As of October 31, 2019
|
||
|
(unaudited)
|
||
Liability component:
|
|
||
Principal
|
$
|
120,589
|
|
Less: unamortized debt issuance costs and debt discount
|
(21,362
|
)
|
|
Net carrying amount
|
$
|
99,227
|
|
|
|
||
|
At Issuance
|
||
|
(unaudited)
|
||
Equity component:
|
|
||
2023 Notes
|
$
|
27,949
|
|
Less: issuance costs
|
(811
|
)
|
|
Carrying amount of the equity component(1)
|
$
|
27,138
|
|
•
|
during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2020 (and only during such fiscal quarter), if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day;
|
•
|
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2025 Notes for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day;
|
•
|
if the Company calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
|
•
|
upon the occurrence of specified corporate events, as described in the Indenture.
|
|
Three Months Ended October 31,
|
||
|
2019
|
||
|
(unaudited)
|
||
Contractual interest expense
|
$
|
188
|
|
Amortization of debt issuance costs
|
275
|
|
|
Amortization of debt discount
|
4,649
|
|
|
Total
|
$
|
5,112
|
|
|
As of October 31, 2019
|
||
|
(unaudited)
|
||
Liability component:
|
|
||
Principal
|
$
|
1,060,000
|
|
Less: unamortized debt issuance costs and debt discount
|
(231,763
|
)
|
|
Net carrying amount
|
$
|
828,237
|
|
|
|
||
|
At Issuance
|
||
|
(unaudited)
|
||
Equity component:
|
|
||
2025 Notes
|
$
|
221,387
|
|
Less: issuance cost
|
(4,040
|
)
|
|
Carrying amount of the equity component(1)
|
$
|
217,347
|
|
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(unaudited)
|
||||||||||||||
Operating lease cost(1)
|
|
$
|
5,882
|
|
|
$
|
6,973
|
|
|
$
|
16,965
|
|
|
$
|
16,213
|
|
|
|
Operating Leases
|
||
|
|
(unaudited)
|
||
2020
|
|
$
|
6,010
|
|
2021
|
|
26,552
|
|
|
2022
|
|
26,654
|
|
|
2023
|
|
26,662
|
|
|
2024
|
|
27,218
|
|
|
Thereafter
|
|
103,340
|
|
|
Total lease payments
|
|
216,436
|
|
|
Less imputed interest
|
|
(47,720
|
)
|
|
Total operating lease liabilities
|
|
$
|
168,716
|
|
|
Three Months Ended
October 31, |
|
Nine Months Ended
October 31, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(unaudited)
|
||||||||||||||
Cost of revenue
|
|
|
|
|
|
|
|
||||||||
Subscription
|
$
|
3,604
|
|
|
$
|
2,383
|
|
|
$
|
9,137
|
|
|
$
|
5,813
|
|
Professional services and other
|
1,900
|
|
|
1,305
|
|
|
5,292
|
|
|
3,277
|
|
||||
Research and development
|
10,894
|
|
|
6,291
|
|
|
26,322
|
|
|
15,776
|
|
||||
Sales and marketing
|
10,937
|
|
|
6,228
|
|
|
26,959
|
|
|
15,852
|
|
||||
General and administrative
|
8,400
|
|
|
5,335
|
|
|
21,984
|
|
|
13,181
|
|
||||
Total
|
$
|
35,735
|
|
|
$
|
21,542
|
|
|
$
|
89,694
|
|
|
$
|
53,899
|
|
|
As of
|
|
|
October 31, 2019
|
|
|
(unaudited)
|
|
Stock options and unvested RSUs outstanding
|
18,526,930
|
|
Available for future stock option and RSU grants
|
16,558,291
|
|
Available for ESPP
|
3,778,949
|
|
|
38,864,170
|
|
|
Number of
Options
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term (Years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||
Outstanding as of January 31, 2019
|
17,803,794
|
|
|
$
|
9.16
|
|
|
7.1
|
|
$
|
1,304,446
|
|
Granted
|
415,547
|
|
|
82.33
|
|
|
|
|
|
|||
Exercised
|
(4,406,311
|
)
|
|
8.26
|
|
|
|
|
|
|||
Canceled
|
(387,442
|
)
|
|
13.76
|
|
|
|
|
|
|||
Outstanding as of October 31, 2019 (unaudited)
|
13,425,588
|
|
|
$
|
11.59
|
|
|
6.4
|
|
$
|
1,308,703
|
|
As of October 31, 2019
|
|
|
|
|
|
|
|
|||||
Vested and exercisable (unaudited)
|
9,018,364
|
|
|
$
|
8.03
|
|
|
6.0
|
|
$
|
911,209
|
|
|
Number of
RSUs |
|
Weighted-
Average Grant Date Fair Value Per Share |
|||
Outstanding as of January 31, 2019
|
4,835,536
|
|
|
$
|
44.49
|
|
Granted
|
2,157,585
|
|
|
114.18
|
|
|
Vested
|
(1,391,628
|
)
|
|
44.34
|
|
|
Forfeited
|
(500,151
|
)
|
|
49.36
|
|
|
Outstanding as of October 31, 2019 (unaudited)
|
5,101,342
|
|
|
$
|
73.53
|
|
|
Three Months Ended
October 31, |
|
Nine Months Ended
October 31, |
||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
||||||
Expected volatility
|
—
|
|
—
|
|
43% - 59%
|
|
39% - 40%
|
Expected term (in years)
|
—
|
|
—
|
|
0.5 - 1.0
|
|
0.5 - 1.0
|
Risk-free interest rate
|
—
|
|
—
|
|
2.05% - 1.95%
|
|
2.12% - 2.34%
|
Expected dividend yield
|
—
|
|
—
|
|
—
|
|
—
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||||||||||
|
Class A
|
|
Class B
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Class B
|
|
Class A
|
|
Class B
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss
|
$
|
(58,761
|
)
|
|
$
|
(4,734
|
)
|
|
$
|
(26,502
|
)
|
|
$
|
(3,015
|
)
|
|
$
|
(145,139
|
)
|
|
$
|
(13,302
|
)
|
|
$
|
(79,991
|
)
|
|
$
|
(14,695
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Weighted-average shares outstanding - basic and diluted
|
110,105
|
|
|
8,871
|
|
|
97,665
|
|
|
11,111
|
|
|
105,893
|
|
|
9,705
|
|
|
90,045
|
|
|
16,542
|
|
||||||||
Net loss per share, basic and diluted
|
$
|
(0.53
|
)
|
|
$
|
(0.53
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(1.37
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31,
|
||||
|
2019
|
|
2018
|
||
|
|
|
|
||
|
(unaudited)
|
||||
Unvested restricted common stock issued and outstanding
|
—
|
|
|
400
|
|
Stock options issued and outstanding
|
13,426
|
|
|
19,314
|
|
Unvested RSUs issued and outstanding
|
5,101
|
|
|
4,936
|
|
Unvested restricted stock awards issued and outstanding
|
177
|
|
|
388
|
|
Shares related to 2023 convertible senior notes
|
2,494
|
|
|
7,134
|
|
Shares subject to warrants related to the issuance of 2023 convertible senior notes
|
2,494
|
|
|
—
|
|
Shares related to 2025 convertible senior notes
|
5,617
|
|
|
—
|
|
Shares committed under the ESPP
|
209
|
|
|
359
|
|
Unvested shares subject to repurchase
|
7
|
|
|
67
|
|
|
29,525
|
|
|
32,598
|
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Subscription
|
$
|
144,517
|
|
|
$
|
97,698
|
|
|
$
|
394,174
|
|
|
$
|
262,393
|
|
Professional services and other
|
8,520
|
|
|
7,878
|
|
|
24,566
|
|
|
21,390
|
|
||||
Total revenue
|
153,037
|
|
|
105,576
|
|
|
418,740
|
|
|
283,783
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
||||||
Subscription(1)
|
30,124
|
|
|
20,265
|
|
|
82,581
|
|
|
55,808
|
|
||||
Professional services and other(1)
|
10,700
|
|
|
9,435
|
|
|
32,118
|
|
|
26,227
|
|
||||
Total cost of revenue
|
40,824
|
|
|
29,700
|
|
|
114,699
|
|
|
82,035
|
|
||||
Gross profit
|
112,213
|
|
|
75,876
|
|
|
304,041
|
|
|
201,748
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||
Research and development(1)
|
41,832
|
|
|
27,596
|
|
|
115,909
|
|
|
72,354
|
|
||||
Sales and marketing(1)
|
87,224
|
|
|
56,911
|
|
|
247,721
|
|
|
165,408
|
|
||||
General and administrative(1)
|
28,887
|
|
|
19,848
|
|
|
81,540
|
|
|
55,873
|
|
||||
Total operating expenses
|
157,943
|
|
|
104,355
|
|
|
445,170
|
|
|
293,635
|
|
||||
Operating loss
|
(45,730
|
)
|
|
(28,479
|
)
|
|
(141,129
|
)
|
|
(91,887
|
)
|
||||
Interest expense
|
(7,826
|
)
|
|
(4,118
|
)
|
|
(16,371
|
)
|
|
(10,893
|
)
|
||||
Other income, net
|
4,982
|
|
|
2,413
|
|
|
11,346
|
|
|
6,211
|
|
||||
Loss on early extinguishment of debt
|
(14,572
|
)
|
|
—
|
|
|
(14,572
|
)
|
|
—
|
|
||||
Interest expense and other income, net
|
(17,416
|
)
|
|
(1,705
|
)
|
|
(19,597
|
)
|
|
(4,682
|
)
|
||||
Loss before provision for (benefit from) income taxes
|
(63,146
|
)
|
|
(30,184
|
)
|
|
(160,726
|
)
|
|
(96,569
|
)
|
||||
Provision for (benefit from) income taxes
|
349
|
|
|
(667
|
)
|
|
(2,285
|
)
|
|
(1,883
|
)
|
||||
Net loss
|
$
|
(63,495
|
)
|
|
$
|
(29,517
|
)
|
|
$
|
(158,441
|
)
|
|
$
|
(94,686
|
)
|
(1)
|
Includes stock-based compensation expense as follows:
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of subscription revenue
|
$
|
3,604
|
|
|
$
|
2,383
|
|
|
$
|
9,137
|
|
|
$
|
5,813
|
|
Cost of professional services and other revenue
|
1,900
|
|
|
1,305
|
|
|
5,292
|
|
|
3,277
|
|
||||
Research and development
|
10,894
|
|
|
6,291
|
|
|
26,322
|
|
|
15,776
|
|
||||
Sales and marketing
|
10,937
|
|
|
6,228
|
|
|
26,959
|
|
|
15,852
|
|
||||
General and administrative
|
8,400
|
|
|
5,335
|
|
|
21,984
|
|
|
13,181
|
|
||||
Total stock-based compensation expense
|
$
|
35,735
|
|
|
$
|
21,542
|
|
|
$
|
89,694
|
|
|
$
|
53,899
|
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Revenue
|
|
|
|
|
|
||||||
Subscription
|
94
|
%
|
|
93
|
%
|
|
94
|
%
|
|
92
|
%
|
Professional services and other
|
6
|
|
|
7
|
|
|
6
|
|
|
8
|
|
Total revenue
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
Cost of revenue
|
|
|
|
|
|
|
|
||||
Subscription
|
20
|
|
|
19
|
|
|
19
|
|
|
20
|
|
Professional services and other
|
7
|
|
|
9
|
|
|
8
|
|
|
9
|
|
Total cost of revenue
|
27
|
|
|
28
|
|
|
27
|
|
|
29
|
|
Gross profit
|
73
|
|
|
72
|
|
|
73
|
|
|
71
|
|
Operating expenses
|
|
|
|
|
|
|
|
||||
Research and development
|
27
|
|
|
26
|
|
|
28
|
|
|
25
|
|
Sales and marketing
|
57
|
|
|
54
|
|
|
59
|
|
|
58
|
|
General and administrative
|
19
|
|
|
19
|
|
|
20
|
|
|
20
|
|
Total operating expenses
|
103
|
|
|
99
|
|
|
107
|
|
|
103
|
|
Operating loss
|
(30
|
)
|
|
(27
|
)
|
|
(34
|
)
|
|
(32
|
)
|
Interest expense
|
(5
|
)
|
|
(4
|
)
|
|
(4
|
)
|
|
(4
|
)
|
Other income (expense), net
|
3
|
|
|
2
|
|
|
3
|
|
|
2
|
|
Loss on early extinguishment of debt
|
(9
|
)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
Interest expense and other income, net
|
(11
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
(2
|
)
|
Loss before provision for (benefit from) income taxes
|
(41
|
)
|
|
(29
|
)
|
|
(39
|
)
|
|
(34
|
)
|
Provision for (benefit from) income taxes
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Net loss
|
(41
|
)%
|
|
(28
|
)%
|
|
(38
|
)%
|
|
(33
|
)%
|
|
Three Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Subscription
|
$
|
144,517
|
|
|
$
|
97,698
|
|
|
$
|
46,819
|
|
|
48
|
%
|
Professional services and other
|
8,520
|
|
|
7,878
|
|
|
642
|
|
|
8
|
|
|||
Total revenue
|
$
|
153,037
|
|
|
$
|
105,576
|
|
|
$
|
47,461
|
|
|
45
|
%
|
Percentage of revenue:
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription
|
94
|
%
|
|
93
|
%
|
|
|
|
|
|
|
|||
Professional services and other
|
6
|
|
|
7
|
|
|
|
|
|
|
|
|||
Total
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|||||||
Subscription
|
$
|
30,124
|
|
|
$
|
20,265
|
|
|
$
|
9,859
|
|
|
49
|
%
|
Professional services and other
|
10,700
|
|
|
9,435
|
|
|
1,265
|
|
|
13
|
|
|||
Total cost of revenue
|
$
|
40,824
|
|
|
$
|
29,700
|
|
|
$
|
11,124
|
|
|
37
|
%
|
Gross profit
|
$
|
112,213
|
|
|
$
|
75,876
|
|
|
$
|
36,337
|
|
|
48
|
%
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription
|
79
|
%
|
|
79
|
%
|
|
|
|
|
|
|
|||
Professional services and other
|
(26
|
)
|
|
(20
|
)
|
|
|
|
|
|
|
|||
Total gross margin
|
73
|
|
|
72
|
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Research and development
|
$
|
41,832
|
|
|
$
|
27,596
|
|
|
$
|
14,236
|
|
|
52
|
%
|
Percentage of revenue
|
27
|
%
|
|
26
|
%
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Sales and marketing
|
$
|
87,224
|
|
|
$
|
56,911
|
|
|
$
|
30,313
|
|
|
53
|
%
|
Percentage of revenue
|
57
|
%
|
|
54
|
%
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
General and administrative
|
$
|
28,887
|
|
|
$
|
19,848
|
|
|
$
|
9,039
|
|
|
46
|
%
|
Percentage of revenue
|
19
|
%
|
|
19
|
%
|
|
|
|
|
|
|
|
Three Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Interest expense
|
$
|
(7,826
|
)
|
|
$
|
(4,118
|
)
|
|
(3,708
|
)
|
|
90
|
%
|
|
Other income, net
|
4,982
|
|
|
2,413
|
|
|
2,569
|
|
|
106
|
|
|||
Loss on early extinguishment of debt
|
(14,572
|
)
|
|
—
|
|
|
(14,572
|
)
|
|
—
|
|
|||
Interest expense and other income, net
|
$
|
(17,416
|
)
|
|
$
|
(1,705
|
)
|
|
$
|
(15,711
|
)
|
|
921
|
%
|
|
Nine Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Subscription
|
$
|
394,174
|
|
|
$
|
262,393
|
|
|
$
|
131,781
|
|
|
50
|
%
|
Professional services and other
|
24,566
|
|
|
21,390
|
|
|
3,176
|
|
|
15
|
|
|||
Total revenue
|
$
|
418,740
|
|
|
$
|
283,783
|
|
|
$
|
134,957
|
|
|
48
|
%
|
Percentage of revenue:
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription
|
94
|
%
|
|
92
|
%
|
|
|
|
|
|
|
|||
Professional services and other
|
6
|
|
|
8
|
|
|
|
|
|
|
|
|||
Total
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
Nine Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|||||||
Subscription
|
$
|
82,581
|
|
|
$
|
55,808
|
|
|
$
|
26,773
|
|
|
48
|
%
|
Professional services and other
|
32,118
|
|
|
26,227
|
|
|
5,891
|
|
|
22
|
|
|||
Total cost of revenue
|
$
|
114,699
|
|
|
$
|
82,035
|
|
|
$
|
32,664
|
|
|
40
|
%
|
Gross profit
|
$
|
304,041
|
|
|
$
|
201,748
|
|
|
$
|
102,293
|
|
|
51
|
%
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription
|
79
|
%
|
|
79
|
%
|
|
|
|
|
|
|
|||
Professional services and other
|
(31
|
)
|
|
(23
|
)
|
|
|
|
|
|
|
|||
Total gross margin
|
73
|
|
|
71
|
|
|
|
|
|
|
|
|
Nine Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Research and development
|
$
|
115,909
|
|
|
$
|
72,354
|
|
|
$
|
43,555
|
|
|
60
|
%
|
Percentage of revenue
|
28
|
%
|
|
25
|
%
|
|
|
|
|
|
|
|
Nine Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Sales and marketing
|
$
|
247,721
|
|
|
$
|
165,408
|
|
|
$
|
82,313
|
|
|
50
|
%
|
Percentage of revenue
|
59
|
%
|
|
58
|
%
|
|
|
|
|
|
|
|
Nine Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
General and administrative
|
$
|
81,540
|
|
|
$
|
55,873
|
|
|
$
|
25,667
|
|
|
46
|
%
|
Percentage of revenue
|
20
|
%
|
|
20
|
%
|
|
|
|
|
|
|
|
Nine Months Ended October 31,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Interest expense
|
$
|
(16,371
|
)
|
|
$
|
(10,893
|
)
|
|
$
|
(5,478
|
)
|
|
50
|
%
|
Other income, net
|
11,346
|
|
|
6,211
|
|
|
5,135
|
|
|
83
|
|
|||
Loss on early extinguishment of debt
|
(14,572
|
)
|
|
—
|
|
|
(14,572
|
)
|
|
—
|
|
|||
Interest expense and other income, net
|
$
|
(19,597
|
)
|
|
$
|
(4,682
|
)
|
|
$
|
(14,915
|
)
|
|
319
|
%
|
|
As of October 31,
|
||||
|
2019
|
|
2018
|
||
Customers with Annual Contract Value (ACV) above $100,000
|
1,325
|
|
|
937
|
|
Dollar-Based Net Retention Rate for the trailing 12 months ended
|
117
|
%
|
|
120
|
%
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Calculated Billings
|
$
|
175,576
|
|
|
$
|
124,038
|
|
|
$
|
478,535
|
|
|
$
|
329,355
|
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Gross profit
|
$
|
112,213
|
|
|
$
|
75,876
|
|
|
$
|
304,041
|
|
|
$
|
201,748
|
|
Add:
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense included in cost of revenue
|
5,504
|
|
|
3,688
|
|
|
14,429
|
|
|
9,090
|
|
||||
Amortization of acquired intangibles
|
1,347
|
|
|
449
|
|
|
3,895
|
|
|
449
|
|
||||
Non-GAAP gross profit
|
$
|
119,064
|
|
|
$
|
80,013
|
|
|
$
|
322,365
|
|
|
$
|
211,287
|
|
Gross margin
|
73
|
%
|
|
72
|
%
|
|
73
|
%
|
|
71
|
%
|
||||
Non-GAAP gross margin
|
78
|
%
|
|
76
|
%
|
|
77
|
%
|
|
74
|
%
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Operating loss
|
$
|
(45,730
|
)
|
|
$
|
(28,479
|
)
|
|
$
|
(141,129
|
)
|
|
$
|
(91,887
|
)
|
Add:
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense
|
35,735
|
|
|
21,542
|
|
|
89,694
|
|
|
53,899
|
|
||||
Charitable contributions
|
510
|
|
|
—
|
|
|
1,162
|
|
|
1,008
|
|
||||
Amortization of acquired intangibles
|
1,347
|
|
|
449
|
|
|
3,895
|
|
|
449
|
|
||||
Acquisition-related expenses
|
—
|
|
|
—
|
|
|
3,449
|
|
|
—
|
|
||||
Non-GAAP operating loss
|
$
|
(8,138
|
)
|
|
$
|
(6,488
|
)
|
|
$
|
(42,929
|
)
|
|
$
|
(36,531
|
)
|
Operating margin
|
(30
|
)%
|
|
(27
|
)%
|
|
(34
|
)%
|
|
(32
|
)%
|
||||
Non-GAAP operating margin
|
(5
|
)%
|
|
(6
|
)%
|
|
(10
|
)%
|
|
(13
|
)%
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(dollars in thousands)
|
||||||||||||||
Net Loss
|
$
|
(63,495
|
)
|
|
$
|
(29,517
|
)
|
|
$
|
(158,441
|
)
|
|
$
|
(94,686
|
)
|
Add:
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense
|
35,735
|
|
|
21,542
|
|
|
89,694
|
|
|
53,899
|
|
||||
Charitable contributions
|
510
|
|
|
—
|
|
|
1,162
|
|
|
1,008
|
|
||||
Amortization of acquired intangibles
|
1,347
|
|
|
449
|
|
|
3,895
|
|
|
449
|
|
||||
Acquisition-related expenses
|
—
|
|
|
—
|
|
|
3,449
|
|
|
—
|
|
||||
Amortization of debt discount
|
7,052
|
|
|
3,604
|
|
|
14,517
|
|
|
9,539
|
|
||||
Loss on early extinguishment of debt, net of debt issuance costs
|
10,794
|
|
|
—
|
|
|
10,794
|
|
|
—
|
|
||||
Non-GAAP net loss
|
$
|
(8,057
|
)
|
|
$
|
(3,922
|
)
|
|
$
|
(34,930
|
)
|
|
$
|
(29,791
|
)
|
Net margin
|
(41
|
)%
|
|
(28
|
)%
|
|
(38
|
)%
|
|
(33
|
)%
|
||||
Non-GAAP net margin
|
(5
|
)%
|
|
(4
|
)%
|
|
(8
|
)%
|
|
(10
|
)%
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Net cash provided by operating activities
|
$
|
10,640
|
|
|
$
|
6,439
|
|
|
$
|
30,768
|
|
|
$
|
5,068
|
|
Less:
|
|
|
|
|
|
|
|
||||||||
Purchases of property and equipment
|
(63
|
)
|
|
(4,463
|
)
|
|
(9,980
|
)
|
|
(14,253
|
)
|
||||
Capitalization of internal-use software costs
|
(1,329
|
)
|
|
(604
|
)
|
|
(2,659
|
)
|
|
(2,329
|
)
|
||||
Free cash flow
|
$
|
9,248
|
|
|
$
|
1,372
|
|
|
$
|
18,129
|
|
|
$
|
(11,514
|
)
|
Net cash used in investing activities
|
$
|
22,888
|
|
|
$
|
(10,545
|
)
|
|
$
|
(125,102
|
)
|
|
$
|
(278,216
|
)
|
Net cash provided by financing activities
|
$
|
798,399
|
|
|
$
|
7,469
|
|
|
$
|
834,731
|
|
|
$
|
342,352
|
|
|
Three Months Ended October 31,
|
|
Nine Months Ended October 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Total revenue
|
$
|
153,037
|
|
|
$
|
105,576
|
|
|
$
|
418,740
|
|
|
$
|
283,783
|
|
Add:
|
|
|
|
|
|
|
|
||||||||
Deferred revenue (end of period)
|
313,756
|
|
|
211,123
|
|
|
313,756
|
|
|
211,123
|
|
||||
Unbilled receivables (beginning of period)
|
1,004
|
|
|
818
|
|
|
1,457
|
|
|
809
|
|
||||
Less:
|
|
|
|
|
|
|
|
||||||||
Unbilled receivables (end of period)
|
(1,028
|
)
|
|
(1,581
|
)
|
|
(1,028
|
)
|
|
(1,581
|
)
|
||||
Deferred revenue (beginning of period)
|
(291,193
|
)
|
|
(191,898
|
)
|
|
(254,390
|
)
|
|
(164,779
|
)
|
||||
Calculated billings
|
$
|
175,576
|
|
|
$
|
124,038
|
|
|
$
|
478,535
|
|
|
$
|
329,355
|
|
|
Nine Months Ended October 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Net cash provided by operating activities
|
$
|
30,768
|
|
|
$
|
5,068
|
|
Net cash used in investing activities
|
(125,102
|
)
|
|
(278,216
|
)
|
||
Net cash provided by financing activities
|
834,731
|
|
|
342,352
|
|
||
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash
|
(241
|
)
|
|
(990
|
)
|
||
Net increase in cash, cash equivalents and restricted cash
|
$
|
740,156
|
|
|
$
|
68,214
|
|
•
|
price our platform effectively so that we are able to attract and retain customers without compromising our profitability;
|
•
|
attract new customers, successfully deploy and implement our platform, upsell or otherwise increase our existing customers’ use of our platform, obtain customer renewals and provide our customers with excellent customer support;
|
•
|
increase our network of channel partners, which include resellers, ISVs, system integrators and other distribution partners;
|
•
|
adequately expand our sales force, and maintain or increase our sales force’s productivity;
|
•
|
successfully identify and enter into agreements with suitable acquisition targets, integrate any acquisitions and integrate acquired technologies into our existing products or use them to develop new products;
|
•
|
successfully introduce new products, enhance existing products and address new use cases;
|
•
|
introduce our platform to new markets outside of the United States;
|
•
|
successfully compete against larger companies and new market entrants; and
|
•
|
increase awareness of our brand on a global basis.
|
•
|
the level of demand for our platform;
|
•
|
our ability to attract new customers, obtain renewals from existing customers and upsell or otherwise increase our existing customers’ use of our platform;
|
•
|
the timing and success of new product introductions by us or our competitors or any other change in the competitive landscape of our market;
|
•
|
pricing pressure as a result of competition or otherwise;
|
•
|
seasonal buying patterns for IT spending;
|
•
|
the mix of revenue attributable to larger transactions as opposed to smaller transactions, and the associated volatility and timing of our transactions;
|
•
|
errors in our forecasting of the demand for our products, which could lead to lower revenue, increased costs or both;
|
•
|
increases in and timing of sales and marketing and other operating expenses that we may incur to grow and expand our operations and to remain competitive;
|
•
|
significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform and products;
|
•
|
our ability to comply with privacy laws and requirements, including the General Data Protection Regulation and California Consumer Privacy Act;
|
•
|
costs related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs;
|
•
|
credit or other difficulties confronting our channel partners;
|
•
|
adverse litigation judgments, settlements of litigation and other disputes or other litigation-related or dispute-related costs;
|
•
|
the impact of new accounting pronouncements and associated system implementations;
|
•
|
changes in the legislative or regulatory environment;
|
•
|
fluctuations in foreign currency exchange rates;
|
•
|
expenses related to real estate, including our office leases, and other fixed expenses; and
|
•
|
general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability.
|
•
|
the need to raise awareness about the uses and benefits of our platform, including our customer identity products;
|
•
|
the need to allay privacy, regulatory and security concerns;
|
•
|
the discretionary nature of purchasing and budget cycles and decisions;
|
•
|
the competitive nature of evaluation and purchasing processes;
|
•
|
announcements or planned introductions of new products, features or functionality by us or our competitors; and
|
•
|
often lengthy purchasing approval processes.
|
•
|
require costly litigation to resolve and/or the payment of substantial damages, ongoing royalty payments or other amounts to settle such disputes;
|
•
|
require significant management time and attention;
|
•
|
cause us to enter into unfavorable royalty or license agreements, if such arrangements are available at all;
|
•
|
require us to discontinue the sale of some or all of our products, remove or reduce features or functionality of our products or comply with other unfavorable terms;
|
•
|
require us to indemnify our customers or third-party service providers; and/or
|
•
|
require us to expend additional development resources to redesign our products.
|
•
|
delays or reductions in customer purchases for both us and the acquired business;
|
•
|
disruption of partner and customer relationships;
|
•
|
potential loss of key employees of the acquired company;
|
•
|
claims by and disputes with the acquired company’s employees, customers, stockholders or third parties;
|
•
|
unknown liabilities or risks associated with the acquired business, product or technology, such as contractual obligations, potential security vulnerabilities of the acquired company and its products and services, potential intellectual property infringement, costs arising from the acquired company’s failure to comply with legal or regulatory requirements and litigation matters;
|
•
|
they could be viewed unfavorably by our partners, our customers, our stockholders or securities analysts;
|
•
|
unforeseen integration or other expenses; and
|
•
|
future impairment of goodwill or other acquired intangible assets.
|
•
|
unexpected costs and errors in the localization of our products, including translation into foreign languages and adaptation for local practices and regulatory requirements;
|
•
|
lack of familiarity and burdens of complying with foreign laws, legal standards, privacy standards, regulatory requirements, tariffs and other barriers;
|
•
|
laws and business practices favoring local competitors or commercial parties;
|
•
|
costs and liabilities related to compliance with the GDPR and disparate data privacy standards and enforcement;
|
•
|
greater risk that our foreign employees or partners will fail to comply with U.S. and foreign laws;
|
•
|
practical difficulties of enforcing intellectual property rights in countries with fluctuating laws and standards and reduced or varied protection for intellectual property rights in some countries;
|
•
|
restrictive governmental actions focusing on cross-border trade, including taxes, trade laws, tariffs, import and export restrictions or quotas, barriers, sanctions, custom duties or other trade restrictions;
|
•
|
unexpected changes in legal and regulatory requirements;
|
•
|
difficulties in managing systems integrators and technology partners;
|
•
|
differing technology standards;
|
•
|
longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
|
•
|
difficulties in managing and staffing international operations and differing employer/employee relationships and local employment laws;
|
•
|
political, economic and social instability, war, armed conflict or terrorist activities;
|
•
|
fluctuations in exchange rates that may increase the volatility of our foreign-based revenue; and
|
•
|
potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems and restrictions on the repatriation of earnings.
|
•
|
develop and enhance our products;
|
•
|
continue to expand our product development, sales and marketing organizations;
|
•
|
hire, train and retain employees;
|
•
|
respond to competitive pressures or unanticipated working capital requirements; or
|
•
|
pursue acquisition opportunities.
|
•
|
overall performance of the equity markets and/or publicly-listed technology companies;
|
•
|
actual or anticipated fluctuations in our revenue or other financial or operating metrics;
|
•
|
changes in the financial projections we provide to the public or our failure to meet these projections;
|
•
|
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates and/or recommendations by any securities analysts who follow our company;
|
•
|
our failure to meet the estimates or the expectations of securities analysts or investors;
|
•
|
recruitment or departure of key personnel;
|
•
|
significant security breaches, technical difficulties or interruptions of our service;
|
•
|
the economy as a whole and market conditions in our industry;
|
•
|
rumors and market speculation involving us or other companies in our industry;
|
•
|
announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
|
•
|
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
|
•
|
lawsuits threatened or filed against us;
|
•
|
other events or factors, including those resulting from war, incidents of terrorism, or responses to these events; and
|
•
|
sales of additional shares of our Class A common stock by us, our directors, our officers or our stockholders.
|
•
|
provide that our board of directors is classified into three classes of directors with staggered three-year terms;
|
•
|
permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships;
|
•
|
require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws;
|
•
|
authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
|
•
|
provide that only the Chairperson of our board of directors, our Chief Executive Officer, or a majority of our board of directors are authorized to call a special meeting of stockholders;
|
•
|
provide for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets;
|
•
|
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
|
•
|
provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
|
•
|
establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
|
•
|
any derivative action or proceeding brought on our behalf;
|
•
|
any action asserting a breach of fiduciary duty;
|
•
|
any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or
|
•
|
or any action asserting a claim against us that is governed by the internal affairs doctrine.
|
•
|
make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry and competitive conditions and adverse changes in government regulation;
|
•
|
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
|
•
|
place us at a disadvantage compared to our competitors who have less debt;
|
•
|
limit our ability to borrow additional amounts to fund acquisitions, for working capital and for other general corporate purposes; and
|
•
|
make an acquisition of our company less attractive or more difficult.
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference from
Form
|
||||
3.1
|
|
|
Exhibit 3.2 to Form S-1 filed on March 13, 2017
|
|||||
3.2
|
|
|
Exhibit 3.4 to Form S-1 filed on March 13, 2017
|
|||||
4.1
|
|
|
Exhibit 4.1 to Form S-1 filed on March 13, 2017
|
|||||
4.2
|
|
|
Exhibit 4.1 to Form 8-K filed September 4, 2019
|
|||||
4.3
|
|
|
Exhibit 4.2 to Form 8-K filed September 4, 2019
|
|||||
10.1
|
|
|
Exhibit 10.1 to Form 8-K filed September 4, 2019
|
|||||
10.2
|
|
|
Filed herewith
|
|||||
31.1
|
|
|
Filed herewith
|
|||||
31.2
|
|
|
Filed herewith
|
|||||
32.1*
|
|
|
Furnished herewith
|
|||||
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its IBRL tags are embedded within the Inline XBRL document.
|
|
Filed herewith
|
||||
101.SCH
|
|
Inline XBRL Taxonomy Extension Schema Document
|
|
Filed herewith
|
||||
101.CAL
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
Filed herewith
|
||||
101.LAB
|
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
Filed herewith
|
||||
101.PRE
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
Filed herewith
|
||||
101.DEF
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
Filed herewith
|
||||
104
|
|
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
|
|
Filed herewith
|
|
Okta, Inc.
|
||
|
|
|
|
|
|
|
|
December 5, 2019
|
|
/s/
|
William E. Losch
|
|
|
|
William E. Losch
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
A.
|
Landlord and Tenant are parties to that certain Office Lease dated December 2, 2017 (the “Lease”). Pursuant to the Lease, Landlord has leased to Tenant space currently containing 207,066 rentable square feet (the “Initial Premises”) in the building located at 100 First Street, San Francisco, California (the “Building”), comprised of: (i) 23,289 rentable square feet of space described as Suite 400 on the fourth (4th) floor of the Building; (ii) 23,289 rentable square feet of space described as Suite 500 on the fifth (5th) floor of the Building; (iii) 23,289 rentable square feet of space described as Suite 600 on the sixth (6th) floor of the Building; (iv) 23,289 rentable square feet of space described as Suite 700 on the seventh (7th) floor of the Building; (v) 19,039 rentable square feet of space described as Suite 800 on the eighth (8th) floor of the Building; (vi) 19,039 rentable square feet of space described as Suite 900 on the ninth (9th) floor of the Building; (vii) 19,039 rentable square feet of space described as Suite 1000 on the tenth (10th) floor of the Building; (viii) 19,039 rentable square feet of space described as Suite 1100 on the eleventh (11th) floor of the Building; (ix) 19,060 rentable square feet of space described as Suite 1400 on the fourteenth (14th) floor of the Building; and (x) 18,694 rentable square feet of space described as Suite 1500 on the fifteenth (15th) floor of the Building. Pursuant to the Lease, Landlord has also leased to Tenant space currently containing 47,939 rentable square feet (the “Must-Take Space”), comprised of (a) 9,137 rentable square feet of space described as Suite 1200 on the twelfth (12th) floor of the Building; (b) 19,401 rentable square feet of space described as Suite 1600 on the sixteenth (16th) floor of the Building; and (c) 19,401 rentable square feet of space described as Suite 1700 on the seventeenth (17th) floor of the Building. The Must-Take Space together with the Initial Premises are collectively referred to herein as the “Original Premises”.
|
B.
|
Tenant has requested that additional space containing 11,361 rentable square feet described as Suite 2400 on the twenty-fourth (24th) floor of the Building, as shown on Exhibit A hereto (the “Expansion Space”), be added to the Original Premises and that the Lease be appropriately amended and Landlord is willing to do the same on the following terms and conditions.
|
1.
|
Expansion and Effective Date. Effective as of the date that is six (6) months after the Expansion Delivery Date (as defined below) (the “Expansion Effective Date”), the Initial Premises is increased from 207,066 rentable square feet in the Building to 218,427 rentable square feet in the Building by the addition of the Expansion Space, and from and after the Expansion Effective Date, the Initial Premises and the Expansion Space, collectively, shall be deemed the “Premises”, as defined in the Lease, and as used herein. The Lease Term for the Expansion Space shall commence on the Expansion Effective Date and end on the Lease Expiration Date (i.e., October 31, 2028). The Expansion Space is subject to all the terms and conditions of the Lease except as expressly modified herein and except that Tenant shall not be entitled to receive any allowances, abatements or other financial concessions granted with respect to the Original Premises unless such concessions are expressly provided for herein with respect to the Expansion Space. Without limiting the generality of the foregoing, during any period from and after the Expansion Effective Date that Tenant is entitled to provide janitorial services, equipment and supplies to the Expansion Space and Tenant does provide such janitorial services, equipment and supplies to the Expansion Space in
|
1.1
|
Subject to Section 1.4 below, Landlord anticipates delivery of the Expansion Space will occur on September 1, 2019 (the “Anticipated Expansion Delivery Date”) and Tenant shall accept possession of the Expansion Space as of the date Landlord delivers possession of the Expansion Space to Tenant (the “Expansion Delivery Date”) in the Delivery Condition as defined in the Work Letter attached to the Lease as Exhibit B (the “Work Letter”). If Landlord fails to deliver the Expansion Space within sixty (60) days of the Anticipated Expansion Delivery Date in the Delivery Condition, Tenant shall be entitled to an abatement of Base Rent in an amount equal to the per diem Base Rent
|
1.2
|
If Landlord is unable for any reason to deliver possession of the Expansion Space to Tenant on the Anticipated Expansion Delivery Date, such failure shall not affect the validity of this Amendment or the obligations of Tenant hereunder (except as otherwise expressly provided in the Lease, as amended hereby), provided that if such delay is the result of a holdover by the prior tenant, Landlord shall use commercially reasonable efforts to recover possession of the Expansion Space and deliver the same to Tenant. The Expansion Delivery Date shall be delayed to the extent that Landlord fails to deliver possession of the Expansion Space for any reason, including but not limited to, holding over by prior occupants. Except as otherwise expressly provided in Section 1.1 above and Section 1.5 below, any such delay in the Expansion Delivery Date shall not subject Landlord to any liability for any loss or damage resulting therefrom. If the Expansion Delivery Date is delayed, the Lease Expiration Date under the Lease shall not be similarly extended.
|
1.3
|
Subject to the applicable express terms of Section 7 below, the Expansion Space (including improvements, if any) shall be accepted by Tenant broom clean and in its “asbuilt” condition and configuration existing on the Expansion Delivery Date. Landlord shall provide an allowance (the “Expansion Space Improvement Allowance”) in the amount of up to $1,136,100.00 (i.e., $100.00 per rentable square foot of the Expansion Space). Such Expansion Space Improvement Allowance shall be applied toward the cost of initial improvements to be performed in the Expansion Space (the “Expansion Space
|
1.4
|
Subject to the terms of this Section 1.4, as of the later of (i) the applicable Expansion Delivery Date; or (ii) the date that is one (1) business day following the date that Tenant has delivered all prepaid rental and insurance certificates required hereunder, Landlord grants Tenant the right to enter the subject Expansion Space at Tenant’s sole risk, solely for the purpose of performing the Expansion Space Improvements and installing telecommunications and data cabling, equipment, furnishings and other personalty, in accordance with the terms and conditions of this Amendment and the Lease. In addition, upon Tenant’s Substantial Completion of the Expansion Space Improvements, Tenant shall have the right to conduct business operations within the Premises prior to the Expansion Effective Date, subject to and in accordance with the terms of this Section 1.4. Such possession prior to the Expansion Effective Date shall be subject to all of the terms and conditions of the Lease, as amended, except that Tenant shall not be required to pay Base Rent or Tenant’s Share of Direct Expenses applicable to the Expansion Space with respect to the period of time prior to the Expansion Effective Date during which Tenant occupies the Expansion Space solely for such purposes; provided, however, that Tenant shall be obligated to pay (a) the costs and expenses, calculated in accordance with the TCCs of Section 6.2 of the Lease, associated with any HVAC provided to Tenant after Building Hours (as defined below) at Tenant’s request and (b) Landlord’s reasonable costs and expenses to provide any additional Building security after Building Hours required due to any reasonable increased risk to property at the
|
1.5
|
In addition to any abatement accrued pursuant to Section 1.1 above, in the event the Expansion Delivery Date with respect to the Expansion Space has not occurred on or before May 1, 2020 (the “Outside Expansion Space Date”), Tenant, as its sole remedy, may terminate this Amendment, solely with respect to the Expansion Space (in which case, the Lease, as amended hereby, solely with respect to the Expansion Space, shall terminate), by giving Landlord written notice of termination on or before the earlier to occur of: (i) five (5) business days after the Outside Expansion Space Date; and (ii) the Expansion Delivery Date. In such event, (A) the Lease shall be deemed terminated solely with respect to the Expansion Space (but shall continue in full force and effect as to the remaining portions of the Premises) and the provisions of this Amendment relating to the Expansion Space shall be null and void; (B) the required L-C Amount under the Lease shall be reduced by the portion of the Additional L-C Amount applicable to the Expansion Space (as set forth in Section 4 below); and (C) the Expansion Space shall be deemed to be a Potential First Offer Space and subject to the TCCs of Section 1.3 of the Lease; provided, however, that, if the Expansion Space is subsequently deemed a Potential First Offer Space, then in such event, the First Offer Rent for the Expansion Space shall be the lesser of (I) Market Rent and (II) the then-current Base Rent payable for the Expansion Space under this Amendment. Landlord and Tenant acknowledge and agree that the Outside Expansion Space Date shall be postponed by the number of days Landlord’s delivery of the Expansion Space is delayed due to events of Force Majeure.
|
2.
|
Must-Take Space. As set forth in the Lease, Andersen Tax LLC, a Delaware limited liability company (the “Existing Must-Take Space Tenant”), is the current tenant of the Must-Take Space. Landlord represents that the Existing Must-Take Space Tenant did not exercise its option to renew the term for its lease of the Must-Take Space. Accordingly, Landlord anticipates that Landlord will deliver the Must-Take Space in its entirety to Tenant on February 1, 2020.
|
3.
|
Expansion Space Base Rent. As of the Expansion Effective Date, the schedule of Base Rent payable with respect to the Expansion Space for the balance of the original Lease Term is the following.
|
Period
|
Rentable
Square
Footage
|
Annual Base Rent*
|
Monthly
Installment of Base
Rent*
|
Annual
Rental Rate per Rentable
Square Foot*
|
Expansion Space Lease Year 1
|
11,361
|
$1,011,129.00
|
$84,260.75
|
$89.00
|
Expansion Space Lease Year 2
|
11,361
|
$1,041,462.87
|
$86,788.57
|
$91.67
|
Expansion Space Lease Year 3
|
11,361
|
$1,072,706.76
|
$89,392.23
|
$94.42**
|
Expansion Space Lease Year 4
|
11,361
|
$1,104,887.96
|
$92,074.00
|
$97.25**
|
Expansion Space Lease Year 5
|
11,361
|
$1,138,034.60
|
$94,836.22
|
$100.17**
|
Expansion Space Lease Year 6
|
11,361
|
$1,172,175.64
|
$97,681.30
|
$103.18**
|
Expansion Space Lease Year 7
|
11,361
|
$1,207,340.91
|
$100,611.74
|
$106.27**
|
Expansion Space Lease Year 8
|
11,361
|
$1,243,561.14
|
$103,630.10
|
$109.46**
|
Expansion Space Lease Year 9
|
11,361
|
$1,280,867.97
|
$106,739.00
|
$112.74**
|
4.
|
Letter of Credit. Landlord is currently holding a letter of credit (the “Letter of Credit”) in the amount of $8,000,000.00 (the “L-C Amount”) as collateral for Tenant’s performance of its
|
5.
|
Tenant’s Share. For the period commencing with the Expansion Effective Date and ending on the Lease Expiration Date, Tenant’s Share for the Expansion Space is 2.51% of the Office Space. Tenant’s Share for the Expansion Space and the Original Premises (which, by definition, includes the Must-Take Space once added) is, collectively, 58.79% of the Office Space.
|
6.
|
Additional Rent. For the period commencing with the Expansion Effective Date and ending on the Lease Expiration Date, Tenant shall pay for Tenant’s Share of Direct Expenses applicable to the Expansion Space in accordance with the terms of the Lease, as amended hereby; provided, however, during such period, the Base Year for the computation of Tenant’s Share of Direct Expenses solely with respect to the Expansion Space is calendar year 2020; provided, further, however, that if the actual Expansion Effective Date occurs after September 30th, 2020, the Base Year for the computation of Tenant’s Share of Direct Expenses solely with respect to the Expansion Space shall be calendar year 2021.
|
7.
|
Improvements.
|
7.1
|
Condition of Expansion Space. Except as specifically set forth in this Amendment and the Work Letter, Tenant shall accept the Expansion Space in its existing “as-is” condition and Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Expansion Space. However, notwithstanding the foregoing, Landlord agrees that the Building Systems serving the Expansion Space shall be in good working order as of the date Landlord delivers possession of the Expansion Space to Tenant. Except to the extent caused by a BS/BS Exception or otherwise arising in connection with any Alterations performed by or on behalf of Tenant, if such Building Systems serving the Expansion Space are not in good working order as of the date possession of the Expansion Space is delivered to Tenant, Landlord shall be responsible for repairing the same at Landlord’s sole cost and expense, provided that Tenant has delivered written notice to Landlord with respect to any Building Systems in the Expansion Space, no later than forty-five (45) days following the Expansion Effective Date.
|
7.2
|
Responsibility for Improvements to Expansion Space. Landlord shall perform the Landlord Work (as defined in the Work Letter) in accordance with the terms of the Work Letter, as amended by Section 8 below.
|
8.
|
Work Letter Revisions. The construction of the Expansion Space Improvements shall be governed by the terms of the Work Letter and not the terms of Article 8 of the Lease. Accordingly, for purposes of this Amendment, (i) all references in the Work Letter to “Improvements” shall mean and refer to the “Expansion Space Improvements”, (ii) all references in the Work Letter to “Must-Take Space” and “Must-Take Space Improvements” shall mean and refer to the “Expansion Space” and “Expansion Space Improvements”, respectively, (iii) all references in the Work Letter to “Improvement Allowance” shall mean the “Expansion Space Improvement Allowance”, (iv) all references in the Work Letter to “Delivery Date” shall mean
|
9.
|
Landlord’s Consent to Assignment or Sublease of Suite 2500. Landlord represents that Landlord, as landlord, and AppsFlyer Inc., a Delaware corporation (including any successors or assigns, “AppsFlyer”), as tenant, are parties to that certain Office Lease dated August 18, 2017 (the “AppsFlyer Lease”) for 11,635 rentable square feet of space described as Suite 2500 (“Suite 2500”) on the twenty-fifth (25th) floor of the Building. Subject to Landlord’s Recapture Right (as defined in Section 10.1 below) set forth in the AppsFlyer Lease, provided that (i) Tenant is not in default beyond notice and cure periods under the Lease, as amended hereby; and (ii) Tenant delivers a fully executed assignment agreement fully assigning all of AppsFlyer’s right, title and interest in and to the AppsFlyer Lease to Tenant or a fully executed sublease agreement, as applicable, Landlord shall consent to such assignment or sublease, as applicable. Upon Landlord’s request, Tenant agrees to execute a commercially reasonable consent agreement.
|
10.
|
Contingent 25th Floor Must-Take Space.
|
10.1
|
If, (i) in connection with a proposed assignment, sublease or other transfer by AppsFlyer for which Landlord has a right to recapture the subject space, Landlord, in its sole and absolute discretion and pursuant to its rights contained in the applicable lease, at any time during the initial Lease Term, exercises its recapture right set forth in the AppsFlyer Lease (the “Recapture Right”), or (ii) the AppsFlyer Lease is terminated for any reason other than Landlord’s exercise of the Recapture Right prior to its stated termination date of June 30, 2025 (the “AppsFlyer Lease Early Termination”), then Tenant shall be required to lease from Landlord and Landlord shall be required to lease to Tenant Suite 2500 (hereinafter, the “25th Floor Must-Take Space”). Landlord covenants and agrees to not
|
10.2
|
If Landlord exercises the Recapture Right or an AppsFlyer Lease Early Termination occurs, Landlord shall provide notice to Tenant (the “25th Floor Must-Take Notice”), which 25th Floor Must-Take Notice shall include Landlord’s determination of the Market Rent payable by Tenant for the 25th Floor Must-Take Space during the 25th Floor MustTake Term (as defined below) in accordance with Exhibit H to the Lease, no later than sixty (60) days prior to the date Landlord anticipates delivery of the 25th Floor Must-Take Space (the “Anticipated 25th Floor Must-Take Delivery Date”). Tenant shall accept possession of the 25th Floor Must-Take Space as of the date Landlord delivers possession of the 25th Floor Must-Take Space to Tenant in the 25th Floor Must-Take Delivery Condition (as defined below) (the “25th Floor Must-Take Delivery Date”); provided, however, that in no event shall the 25th Floor Must-Take Delivery Date occur prior to the later of (a) February 1, 2020, and (b) the Anticipated 25th Floor Must-Take Delivery Date. The Term with respect to the 25th Floor Must-Take Space (the “25th Floor Must-Take Term”) shall commence (the “25th Floor Must-Take Effective Date”) on the earlier of (i) the date that is sixty (60) days after the 25th Floor Must-Take Delivery Date; or (ii) the date on which Tenant first conducts business operations in any portion of the 25th Floor Must-Take Space, and end, unless sooner terminated pursuant to the terms of the Lease, as amended hereby, on the Lease Expiration Date (i.e., October 31, 2028). Notwithstanding the foregoing, in the event that based upon the timing of events, the 25th Floor Must-Take Effective Date is later than October 31, 2023, the 25th Floor Must-Take Term shall be sixty (60) months from the 25th Floor Must-Take Effective Date. Accordingly, the parties agree that the 25th Floor Must-
|
10.3
|
As of the 25th Floor Must-Take Effective Date, the 25th Floor Must-Take Space shall become part of the Premises and the rentable square footage of the Premises shall be increased to include the 25th Floor Must-Take Space. Tenant’s Share for the 25th Floor Must-Take Space shall be 2.57% of the Office Space. The 25th Floor Must-Take Space shall be subject to all the terms and conditions of the Lease, as amended hereby, except as expressly modified herein and except that Tenant shall not be entitled to receive any allowances, abatements or other financial concessions granted with respect to the Original Premises or the Expansion Space except as expressly provided in this Section 10. Except as otherwise expressly set forth below, if an allowance is provided with respect to the 25th Floor Must-Take Space, any unused portion thereof remaining after the eighteenth (18th) month following the 25th Floor Must-Take Effective Date (the “25th Floor Must-Take Improvement Allowance Sunset Date”) shall remain with Landlord and Tenant shall
|
10.4
|
The Base Rent payable by Tenant during the 25th Floor Must-Take Term shall be equal to the Market Rent (as that term is defined in, and determined pursuant to, Exhibit H to the Lease). For purposes of this Section 10, all references to the “Premises” in Exhibit H to the Lease shall mean the 25th Floor Must-Take Space. In the event that Tenant does not agree with Landlord’s determination of the Rent payable by Tenant for the 25th Floor Must-Take Space (the “25th Floor Must-Take Rent”) as set forth in Landlord’s 25th Floor Must-Take Notice, then within fifteen (15) days after Landlord’s delivery of the 25th Floor Must-Take Notice, Tenant shall deliver to Landlord Tenant's calculation of the Market Rent (the “Tenant’s 25th Floor Must-Take Rent Calculation”).
|
10.5
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Tenant shall pay Tenant’s Share of Direct Expenses for the 25th Floor Must-Take Space on the same terms and conditions set forth in the Lease, as amended hereby; provided that the Base Year for the computation of Tenant’s Share of Direct Expenses solely with respect to the 25th Floor Must-Take Term shall be either (i) the calendar year in which the 25th Floor Must-Take Term commences, if the 25th Floor Must-Take Term commences on or before September 30th of such calendar year, or (ii) the calendar year immediately subsequent to the calendar year in which the 25th Floor Must-Take Term commences, if the 25th Floor Must-Take Term commences after September 30th of such calendar year. In addition, if the Base Year is determined pursuant to subpart (i) above, Tenant shall not be required to pay Tenant’s Share of Direct Expenses applicable to the 25th Floor Must-Take Space during the first twelve (12) full Lease Months of the 25th Floor Must-Take Term.
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10.6
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Subject to the terms of Section 4 above and this Section 10, Tenant shall deliver to Landlord on or before the 25th Floor Must-Take Delivery Date, an amendment to the existing Letter of Credit (the “25th Floor Must-Take L-C Amendment”), increasing the L-C Amount by an amount equal to three (3) months of the Base Rent payable during the last rental period of the 25th Floor Must-Take Term; provided, however, that Tenant shall not be required to deliver the 25th Floor Must-Take L-C Amendment if, as of the fiscal quarter immediately prior to the anticipated 25th Floor Must-Take Delivery Date based on Landlord’s 25th Floor Must-Take Notice (the “25th Floor Must-Take L-C Reference
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10.8
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Landlord shall prepare an amendment (the “25th Floor Must-Take Amendment”) to reflect the 25th Floor Must-Take Effective Date and the changes in Base Rent, rentable square footage of the Premises, Tenant’s Share, any improvement allowance and other appropriate terms. A copy of the 25th Floor Must-Take Amendment shall be sent to Tenant within a
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10.9
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Without limiting the generality of the foregoing, during any period from and after the 25th Floor Must-Take Effective Date that Tenant is entitled to provide janitorial services, equipment and supplies to the 25th Floor Must-Take Space and Tenant does provide such janitorial services, equipment and supplies to the 25th Floor Must-Take Space in accordance with Section 6.1.5 of the Lease, Tenant shall be entitled to the Janitorial Credit, subject to and in accordance with the terms and conditions of Section 6.1.5 of the Lease.
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10.10
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If Landlord fails to tender possession of the 25th Floor Must-Take Space to Tenant in the 25th Floor Must-Take Delivery Condition on or before the date that is one hundred twenty (120) days following the Anticipated 25th Floor Must-Take Delivery Date (the “25th Floor
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11.
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Stipulation of Rentable Square Feet of Expansion Space and Building. For purposes of this Amendment, “rentable square feet” of the Expansion Space and the 25th Floor Must-Take Space shall be deemed as set forth in Recital B and Section 9, respectively. Neither the Expansion Space nor the 25th Floor Must-Take Space shall be subject to remeasurement during the initial Lease Term.
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12.
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Other Pertinent Provisions. Landlord and Tenant agree that, effective as of the date of this Amendment (unless different effective date(s) is/are specifically referenced in this Section), the Lease shall be amended in the following additional respects:
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12.1
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Insurance. Tenant’s insurance required under Section 10.3 of the Lease (“Tenant’s Insurance”) shall include the Expansion Space as of the earlier of (i) the date on which Tenant first accesses the Expansion Space pursuant to this Amendment; or (ii) the Expansion Effective Date (the “Expansion Space Insurance Start Date”). Tenant shall provide Landlord with a certificate of insurance, in form and substance satisfactory to Landlord and otherwise in compliance with Section 10.5 of the Lease, evidencing that Tenant’s Insurance covers the Expansion Space, on or before the Expansion Space Insurance Start Date, and thereafter as necessary to assure that Landlord always has current certificates evidencing Tenant’s Insurance.
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12.2
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Parking. Tenant may elect to rent from Landlord, on a monthly basis:
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(A)
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up to sixteen (16) additional valet parking passes (the “Must-Take Space Parking Allocation”) which parking passes shall pertain to the Parking Garage and be effective concurrent with the Must-Take Effective Date;
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(C)
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up to four (4) additional valet parking passes (the “25th Floor Must-Take Space Parking Allocation”) which parking passes shall pertain to the Parking Garage and be effective concurrent with the 25th Floor Must-Take Effective Date; and/or
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(D)
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up to three (3) additional valet parking passes (the “Expansion Space Parking Allocation”) which parking passes shall pertain to the Parking Garage and be effective concurrent with the Expansion Effective Date.
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12.3
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Extension Option.
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12.3.1
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Landlord and Tenant acknowledge and agree that Tenant’s option to extend the Lease Term, set forth in Section 2.2 of the Lease shall apply to the Original Premises (including the Must-Take Space), the Expansion Space and the 25th Floor Must-Take Space (if applicable), and that, subject to and in accordance with the terms of Section 2.2 of the Lease, as amended by this Section 12.3, Tenant shall have the right to extend the Lease Term with respect to each of the Expansion Space and the 25th Floor Must-Take Space, individually, or both the Expansion Space and the 25th Floor Must-Take Space, to be coterminous with the Option Term (as defined in Section 2.2.1 of the Lease). Notwithstanding anything to the contrary contained in the Lease, as amended hereby, if Tenant elects, in Tenant’s sole discretion, to exercise its option to extend the Lease Term with respect to the Expansion Space and/or the 25th Floor Must-Take Space, the determination of continuous floors in Section 2.2.1(iii) of the Lease from the bottom up, or from the top down, as applicable, shall be deemed to include the Expansion Space and/or the 25th Floor Must-Take Space (as applicable), and accordingly Tenant may elect to extend the Lease Term (from the top down, or from the bottom up) from either the Expansion Space or the 25th Floor Must-Take Space, or both, provided that if
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12.3.2
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Section 2.2.1(iv) of the Lease is hereby deleted.
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12.4
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Capital Costs for Expansion Space and 25th Floor Must-Take Space. Clause (y) of Section 4.2.4(xiii) of the Lease is hereby amended and restated as follows:
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12.5
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Exclusion of Expansion Space and 25th Floor Must-Take Space from Operating Costs. Section 4.2.4 of the Lease is hereby amended to add new exclusions (rr) and (ss) to the list of exclusions of Operating Costs as follows:
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12.6
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Limitation on Landlord Damages. The final sentence of Section 19.2.1 of the Lease is hereby amended and restated in its entirety as follows:
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12.7
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Internal Stairwell. Notwithstanding anything to the contrary contained in the Lease, as amended hereby, Landlord hereby agrees that Tenant shall have the right, but not the obligation, at any time that Tenant is leasing both the Expansion Space and the 25th Floor Must-Take Space and is not in default beyond any applicable notice and cure periods under the Lease, to construct, at Tenant’s sole cost and expense, subject to the application of the
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12.8
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Lobby FF&E. Notwithstanding anything to the contrary contained in the Lease, during such time as Tenant and/or its Permitted Transferees leases at least two hundred eighty thousand (280,000) rentable square feet of the Building (the “280,000 RSF Leasing Requirement”), Tenant may install, in accordance with, and subject to, the terms and conditions set forth in Article 8 of the Lease, its furniture, fixtures and equipment in the first floor lobby of the Building (the “Lobby FF&E”). The type, size, design, and location of such Lobby FF&E (including, for the avoidance of doubt, any changes to existing Lobby FF&E) shall be subject to Landlord’s review and approval, which approval shall not be unreasonably withheld, conditioned or delayed. If Landlord fails to approve any proposed Lobby FF&E within ten (10) business days after receipt of request, then Tenant may provide Landlord with a second written request for approval. If Landlord fails to approve or disapprove such proposed Lobby FF&E within ten (10) business days after Landlord’s receipt of Tenant’s second request therefor, such Lobby FF&E shall be deemed approved. Tenant, at its sole cost and expense, shall maintain the Lobby FF&E in good condition and repair during the Lease Term and in accordance with the conditions and requirements described in any warranties issued by the manufacturer(s) of the Lobby FF&E. Tenant shall make any and all repairs that are necessary to the Lobby FF&E at Tenant’s sole cost and expense. If Tenant fails to make any repairs to the Lobby FF&E for more than fifteen (15) days after notice from Landlord (although notice shall not be required if there is an emergency), Landlord may make the repairs, and Tenant shall pay the reasonable cost of the repairs to Landlord within thirty (30) days after receipt of an invoice, together with reasonable supporting evidence (and, in such event, Tenant shall also pay an administrative
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12.9
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Use of Tenant’s Lobby Sign. Section 23.5.7 of the Lease is hereby amended and restated in its entirety as follows: “Use of Tenant’s Lobby Sign. Tenant shall be solely responsible for the operation of Tenant’s Lobby Sign and shall be entitled to select the content being displayed on Tenant’s Lobby Sign for eighty-five percent (85%) of the time the Tenant’s Lobby Sign is in operation during Building Hours and eighty-five percent (85%) of the time the Tenant’s Lobby Sign is in operation during non-Building Hours. Tenant shall permit Landlord to select the content being displayed on Tenant’s Lobby Sign for fifteen percent (15%) of the time the Tenant’s Lobby Sign is in operation during Building Hours and fifteen percent (15%) of the time the Tenant’s Lobby Sign is in operation during non-Building Hours, subject to Tenant’s reasonably approval of such content and the specific Building Hours available for use by Landlord. Notwithstanding anything to the contrary contained in the Lease, as amended hereby, so long as the 280,000 RSF Leasing Requirement is satisfied, the foregoing references to: (i) “fifteen percent (15%)” shall be amended to be “ten percent (10%)”, and (ii) “eighty-five percent (85%)” shall be amended to be “ninety percent (90%)”.
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12.10
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Mission Street Signage. Notwithstanding anything to the contrary contained in the Lease, as amended hereby, so long as the 280,000 RSF Leasing Requirement is satisfied, Tenant shall have the exclusive right to the exterior Building signage located on Mission Street, and accordingly (i) Section 23.4.1(b) of the Lease shall be deemed modified to change “non-exclusive right (in common with Landlord and other third parties)” to “exclusive right” and (ii) the third sentence of Section 23.4.2 of the Lease shall be deemed deleted in its entirety.
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13.
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Miscellaneous.
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13.1
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This Amendment, including Exhibit A (Outline and Location of Expansion Space) attached hereto, sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment. The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.
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13.2
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Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect. In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control.
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13.3
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Neither party shall be bound by this Amendment until both parties have executed and delivered the same to each other.
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13.4
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Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this Amendment other than Colliers International. Tenant agrees to indemnify and hold Landlord and the Landlord Parties harmless from all claims of any other brokers claiming to have represented Tenant in connection with this Amendment. Landlord hereby represents to Tenant that Landlord has dealt with no broker in connection with this Amendment other than CBRE, Inc. Landlord agrees to indemnify and hold Tenant and the Tenant Parties harmless from all claims of any other brokers claiming to have represented Landlord in connection with this Amendment.
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13.5
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The terms and conditions of Section 29.43 of the Lease shall apply to this Amendment.
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13.6
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For purposes of Section 1938(a) of the California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that neither the Premises nor the interior of the Building have undergone inspection by a Certified Access Specialist (CASp). As required by Section 1938(e) of the California Civil Code, Landlord hereby states as follows: “A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection,
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13.7
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THE PARTIES HERETO CONSENT AND AGREE THAT THIS AMENDMENT MAY BE SIGNED AND/OR TRANSMITTED BY FACSIMILE, E-MAIL OF A .PDF DOCUMENT OR USING ELECTRONIC SIGNATURE TECHNOLOGY (E.G., VIA DOCUSIGN OR SIMILAR ELECTRONIC SIGNATURE TECHNOLOGY), AND THAT SUCH SIGNED ELECTRONIC RECORD SHALL BE VALID AND AS EFFECTIVE TO BIND THE PARTY SO SIGNING AS A PAPER COPY BEARING SUCH PARTY’S HAND-WRITTEN SIGNATURE. THE PARTIES FURTHER CONSENT AND AGREE
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13.8
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To induce Tenant to execute this Amendment, and in addition to the other representations and warranties of Landlord contained in the Lease, as amended hereby, Landlord warrants and represents that:
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(a)
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As of Expansion Delivery Date, no person or entity (except Tenant) has any right to lease or take possession of any portion of the Expansion Space.
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(b)
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As of the date of this Amendment, to Landlord’s knowledge, no restrictions contained in any leases of other tenants at the Project do or shall prohibit, restrict, conflict with or adversely affect Tenant’s use and occupancy of the Expansion Space or the Premises or the intended use of the rights granted to Tenant in the Lease, as amended hereby, including the Ancillary Uses.
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(c)
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As of the date of this Amendment, no Security Document that affects the validity of the Lease, as amended hereby, encumbers Landlord’s interest in the Building or Project as of the date hereof.
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By:
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100 First Street Member, LLC, a Delaware limited liability company, its Manager
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By:
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Kilroy Realty, L.P., a Delaware limited partnership, its Managing Member
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/s/ Todd McKinnon
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Todd McKinnon
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Chief Executive Officer
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(Principal Executive Officer)
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/s/ William E. Losch
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William E. Losch
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Chief Financial Officer
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(Principal Financial Officer)
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1.
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The Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2019, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
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2.
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The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Todd McKinnon
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Todd McKinnon
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Chief Executive Officer
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(Principal Executive Officer)
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/s/ William E. Losch
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William E. Losch
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Chief Financial Officer
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(Principal Financial Officer)
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