Form 10-Q Cloudera, Inc. For: Jul 31

September 12, 2017 3:36 PM
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 10-Q 
_______________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2017
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________to________
Commission File Number 001-38069
 
CLOUDERA, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
26-2922329
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)
_______________________________________________
395 Page Mill Road
Palo Alto, CA 94306
(650) 362-0488
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
_______________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No   ¨  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or a emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
 
Accelerated filer
¨
Non-accelerated filer
x
 
Smaller reporting company
¨
(Do not check if a smaller reporting company)
 
Emerging growth company
x
If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2 (B) of the Securities Act
¨
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes   ¨   No  x
As of August 31, 2017, there were 131,481,143 shares of the registrant’s common stock outstanding.
 



TABLE OF CONTENTS
 
 
Page
 
Part I. Financial Information
 
Item 1.
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
Part II. Other Information
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 

1

Table of Contents


PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLOUDERA, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
July 31,
2017
 
January 31,
2017
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
68,936

 
$
74,186

Short-term marketable securities
325,744

 
160,770

Accounts receivable, net
84,805

 
101,549

Prepaid expenses and other current assets
17,509

 
13,197

Total current assets
496,994

 
349,702

Property and equipment, net
13,027

 
13,104

Marketable securities, noncurrent
81,072

 
20,710

Intangible assets, net
5,166

 
7,051

Goodwill
31,516

 
31,516

Restricted cash
18,048

 
15,446

Other assets
3,994

 
5,015

TOTAL ASSETS
$
649,817

 
$
442,544

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable
$
6,326

 
$
3,550

Accrued compensation
32,254

 
33,376

Other accrued liabilities
15,670

 
9,918

Deferred revenue, current portion
194,252

 
192,242

Total current liabilities
248,502

 
239,086

Deferred revenue, less current portion
36,869

 
25,182

Other liabilities
9,058

 
4,345

TOTAL LIABILITIES
294,429

 
268,613

Commitments and contingencies (Note 6)


 


Redeemable convertible preferred stock

 
657,687

STOCKHOLDERS’ EQUITY (DEFICIT):
 
 
 
Common stock
7

 
2

Additional paid-in capital
1,318,447

 
192,795

Accumulated other comprehensive loss
(521
)
 
(556
)
Accumulated deficit
(962,545
)
 
(675,997
)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)
355,388

 
(483,756
)
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
$
649,817

 
$
442,544


See Notes to Condensed Consolidated Financial Statements
2

Table of Contents
CLOUDERA, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)


 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Subscription
$
73,986

 
$
50,688

 
$
138,657

 
$
91,360

Services
15,842

 
13,768

 
30,767

 
29,581

Total revenue
89,828

 
64,456

 
169,424

 
120,941

Cost of revenue:(1) (2)
 
 
 
 
 
 
 
Subscription
15,215

 
9,706

 
41,687

 
19,057

Services
16,755

 
11,633

 
50,395

 
23,317

Total cost of revenue
31,970

 
21,339

 
92,082

 
42,374

Gross profit
57,858

 
43,117

 
77,342

 
78,567

Operating expenses:(1) (2)
 
 
 
 
 
 
 
Research and development
42,844

 
26,635

 
138,675

 
51,150

Sales and marketing
62,135

 
46,902

 
172,578

 
93,044

General and administrative
18,564

 
8,367

 
54,114

 
16,676

Total operating expenses
123,543

 
81,904

 
365,367

 
160,870

Loss from operations
(65,685
)
 
(38,787
)
 
(288,025
)
 
(82,303
)
Interest income, net
1,440

 
708

 
2,089

 
1,448

Other income (expense), net
817

 
(178
)
 
839

 
(15
)
Net loss before provision for income taxes
(63,428
)
 
(38,257
)
 
(285,097
)
 
(80,870
)
Provision for income taxes
(801
)
 
(470
)
 
(1,451
)
 
(970
)
Net loss
$
(64,229
)
 
$
(38,727
)
 
$
(286,548
)
 
$
(81,840
)
Net loss per share, basic and diluted
$
(0.48
)
 
$
(1.07
)
 
$
(3.28
)
 
$
(2.27
)
Weighted-average shares used in computing net loss per share, basic and diluted
134,506

 
36,257

 
87,293

 
36,090

___________
(1)
Amounts include stock‑based compensation expense as follows (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Cost of revenue – subscription
$
3,693

 
$
374

 
$
19,393

 
$
708

Cost of revenue – services
3,890

 
457

 
24,227

 
931

Research and development
13,128

 
1,458

 
81,029

 
3,013

Sales and marketing
12,137

 
1,474

 
72,678

 
3,033

General and administrative
6,603

 
1,815

 
33,206

 
3,556

(2)
Amounts include amortization of acquired intangible assets as follows (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Cost of revenue – subscription
$
510

 
$
514

 
$
1,024

 
969

Sales and marketing
431

 
431

 
861

 
861




See Notes to Condensed Consolidated Financial Statements
3

Table of Contents
CLOUDERA, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)


 
Three Months Ended July 31,
 
Six Months Ended
July 31,
 
2017
 
2016
 
2017
 
2016
Net loss
$
(64,229
)
 
$
(38,727
)
 
$
(286,548
)
 
$
(81,840
)
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation gains (losses)
(34
)
 
(204
)
 
(26
)
 
33

Unrealized gain on investments
26

 
84

 
61

 
353

Total other comprehensive income, net of tax
(8
)
 
(120
)
 
35

 
386

Comprehensive loss
$
(64,237
)
 
$
(38,847
)
 
$
(286,513
)
 
$
(81,454
)


See Notes to Condensed Consolidated Financial Statements
4

Table of Contents
CLOUDERA, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)




Six Months Ended July 31,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net loss
$
(286,548
)
 
$
(81,840
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
6,994

 
4,953

Stock-based compensation
230,533

 
11,241

Accretion and amortization of marketable securities
414

 
1,966

Changes in assets and liabilities:
 
 
 
Accounts receivable
16,744

 
4,011

Prepaid expenses and other assets
639

 
(784
)
Accounts payable
1,674

 
1,872

Accrued compensation
(4,983
)
 
(3,128
)
Accrued expenses and other liabilities
2,970

 
1,006

Deferred revenue
13,697

 
8,604

Net cash used in operating activities
(17,866
)
 
(52,099
)
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Purchases of marketable securities
(387,154
)
 
(90,409
)
Sales of marketable securities
43,198

 
34,372

Maturities of marketable securities
117,604

 
129,945

Cash used in business combinations, net of cash acquired

 
(2,700
)
Capital expenditures
(1,971
)
 
(6,135
)
Net cash provided by (used in) investing activities
(228,323
)
 
65,073

CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Net proceeds from issuance of common stock in initial public offering
237,686

 

Proceeds from employee stock plans
5,932

 
1,633

Net cash provided by financing activities
243,618

 
1,633

Effect of exchange rate changes
(77
)
 
34

Net increase (decrease) in cash, cash equivalents and restricted cash
(2,648
)
 
14,641

Cash, cash equivalents and restricted cash — Beginning of period
89,632

 
35,994

Cash, cash equivalents and restricted cash — End of period
$
86,984

 
$
50,635

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
 
 
Cash paid for income taxes
$
1,352

 
$
654

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
 
 
 
Purchases of property and equipment in other accrued liabilities
$
3,054

 
$
570

Deferred offering costs in accounts payable and other accrued liabilities
$
264

 
$

Conversion of redeemable convertible preferred stock to common stock
$
657,687

 
$


See Notes to Condensed Consolidated Financial Statements
5

Table of Contents
CLOUDERA, INC.
Notes to Unaudited Condensed Consolidated Financial Statements


 
1.    Organization and Description of Business
Cloudera, Inc. was incorporated in the state of Delaware on June 27, 2008 and is headquartered in Palo Alto, California. We sell subscriptions and services for our data management, machine learning and advanced analytics platform. This platform delivers an integrated suite of capabilities for data management, machine learning and advanced analytics, affording customers an agile, scalable and cost‑effective solution for transforming their businesses.
Unless the context requires otherwise, the words “we,” “us,” “our,” the “Company” and “Cloudera” refer to Cloudera, Inc. and its subsidiaries taken as a whole.
As of July 31, 2017 and January 31, 2017, we had an accumulated deficit totaling $962.5 million and $676.0 million, respectively. We have funded our operations primarily with the net proceeds we received through the sale of our common stock in our initial public offering (“IPO”), private sales of equity securities and proceeds from the sale of our subscriptions and services. Management believes that currently available resources will be sufficient to fund our cash requirements for at least the next twelve months.
Initial Public Offering
On May 3, 2017, we completed our IPO in which we issued and sold 17,250,000 shares of common stock, inclusive of the underwriters’ over-allotment option, at a public offering price of $15.00 per share. We received net proceeds of $235.4 million after deducting underwriting discounts and commissions of $18.1 million and other issuance costs of $5.3 million. In conjunction with the IPO, we donated $2.4 million, or 1% of the net proceeds, to fund the Cloudera Foundation’s activities. Immediately prior to the closing of the IPO, all 74,907,415 shares of our then-outstanding redeemable convertible preferred stock automatically converted into shares of common stock and we reclassified $657.7 million from temporary equity to additional paid in capital on our condensed consolidated balance sheet.
2.    Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. The condensed consolidated financial statements include the results of Cloudera, Inc. and its wholly owned subsidiaries which are located in various countries, including the United States, Australia, China, Germany, Hungary and the United Kingdom. All intercompany balances and transactions have been eliminated upon consolidation. The condensed consolidated balance sheet as of January 31, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the information contained herein reflects all adjustments necessary for a fair presentation of our results of operations, financial position and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the three and six months ended July 31, 2017 are not necessarily indicative of results to be expected for the full year ending January 31, 2018 or for any other interim period or for any other future year.
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2017, included in our prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended (Securities Act), with the SEC on April 28, 2017.

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Significant Accounting Policies
There have been no changes to our significant accounting policies described in the prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act, on April 28, 2017.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2018, for example, refers to the fiscal year ended January 31, 2018.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include revenue recognition, the useful lives of property and equipment and intangible assets, allowance for doubtful accounts, stock‑based compensation expense, annual bonus attainment, self‑insurance costs incurred, the fair value of tangible and intangible assets acquired and liabilities assumed resulting from business combinations, the fair value of common stock prior to our IPO, the assessment of elements in a multi‑element arrangement and the valuation assigned to each element, and contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ significantly from these estimates.
Segments
We operate as two operating segments – subscription and services. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, who is our chief executive officer, in deciding how to allocate resources and assess performance.
Cash, Cash Equivalents and Restricted Cash
Cash equivalents consist of short‑term, highly liquid investments with original maturities of three months or less from the date of purchase. Restricted cash represents cash on deposit with financial institutions in support of letters of credit outstanding in favor of certain landlords for office space.
Cash as reported on the condensed consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and the restricted cash as shown on the condensed consolidated balance sheets. Cash as reported on the condensed consolidated statements of cash flows consists of the following (in thousands):
 
As of July 31,
 
2017
 
2016
Cash and cash equivalents
$
68,936

 
$
50,609

Restricted cash
18,048

 
26

Cash, cash equivalents and restricted cash
$
86,984

 
$
50,635

Concentration of Credit Risk and Significant Customers
Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, restricted cash, and accounts receivable. Our cash is deposited with high credit quality financial institutions. At times such deposits may be in excess of the Federal Depository Insurance Corporation insured limits. We have not experienced any losses on these deposits.
At July 31, 2017, one customer represented 18% of accounts receivable. At January 31, 2017, another customer represented 21% of accounts receivable. For the three and six months ended July 31, 2017 and 2016, no single customer accounted for 10% or more of revenue.

7



Revenue Recognition
We generate revenue from subscriptions and services. Subscription arrangements are typically one to three years in length but may be up to seven years in limited cases. Arrangements with our customers typically do not include general rights of return. Incremental direct costs incurred related to the acquisition or origination of a customer contract are expensed as incurred.
Revenue recognition commences when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the fee is fixed or determinable; and (iv) collection is probable.
Subscription revenue
Subscription revenue relates to term (or time‑based) subscription agreements for both open source and proprietary software. Subscriptions include internet, email and phone support, bug fixes, and the right to receive unspecified software updates and upgrades released when and if available during the subscription term. Revenue for subscription arrangements is recognized ratably over the contractual term of the arrangement beginning on the date access to the subscription is made available to the customer.
Services revenue
Services revenue relates to professional services for the implementation and use of our subscriptions, training and education services and related reimbursable travel costs.
For time and materials and fixed fee arrangements, revenue is recognized as the services are performed or upon acceptance, if applicable. For milestone‑based arrangements, revenue is recognized upon acceptance or subsequent to completion upon the lapse of any acceptance period.
Revenue for training and education services is recognized upon delivery, except for On‑Demand Training, which is recognized ratably over the contractual term.
Multipleelement arrangements
Arrangements with our customers generally include multiple elements such as subscription and services. We allocate revenue to each element of the arrangement based on vendor‑specific objective evidence of each element’s fair value (VSOE) when we can demonstrate sufficient evidence of the fair value. VSOE for elements of an arrangement is based upon the normal pricing and discounting practices for those elements when sold separately on a stand‑alone basis.
We have established VSOE for some of our services. If VSOE for one or more undelivered elements does not exist, revenue recognition does not commence until delivery of both the subscription and services have commenced, or when VSOE of the undelivered elements has been established. Once revenue recognition commences, revenue for the arrangement is recognized ratably over the longest service period in the arrangement.
Reseller arrangements
We recognize subscription revenue for sales through resellers or other indirect sales channels. Subscription revenue from these sales is generally recognized upon sell‑through to an end user customer. Where payments to us are believed to be contingent upon payment by the end user to the reseller, subscription revenue is not recognized until cash is collected.
Deferred revenue
Deferred revenue consists of amounts billed to or collected from customers under a binding agreement provided delivery of the related subscription and services has commenced.

8


Stock‑Based Compensation
We recognize stock‑based compensation expense for all stock‑based payments. Employee stock‑based compensation cost is estimated at the grant date based on the fair value of the equity for financial reporting purposes and is recognized as expense over the requisite service period. Prior to our IPO, fair value of our common stock for financial reporting purposes was determined considering objective and subjective factors and required judgment to determine the fair value of common stock for financial reporting purposes as of the date of each equity grant or modification.
We have elected to calculate the fair value of options based on the Black‑Scholes option‑pricing model. The Black‑Scholes model requires the use of various assumptions including expected option life and expected stock price volatility. We estimate the expected term for stock options using the simplified method due to the lack of historical exercise activity. The simplified method calculates the expected term as the midpoint between the vesting date and the contractual expiration date of the award. We estimate the options’ volatility using volatilities of a group of public companies in a comparable industry, stage of life cycle, and size. The interest rate is derived from government bonds with a similar term as the options’ expected lives. We have not declared nor do we expect to declare dividends. Therefore, there is no dividend impact on the valuation of options. We are using the straight‑line (single‑option) method for employee expense attribution for stock options.
We have granted RSUs to our employees and members of our board of directors under the 2008 Equity Incentive Plan (2008 Plan). The employee RSUs vest upon the satisfaction of both a service‑based condition and a liquidity event‑related performance condition. The service‑based condition for the majority of these awards is generally satisfied pro‑rata over four years. The liquidity event‑related performance condition is satisfied upon the occurrence of a qualifying liquidity event, such as the effective date of an IPO, or six months following the effective date of an IPO. During the quarter ended April 30, 2017, the majority of RSUs were modified such that the liquidity event‑related performance condition is satisfied upon the effective date of an IPO, rather than six months following an IPO. The modification established a new measurement date for these modified RSUs. The liquidity event‑related performance condition is viewed as a performance‑based criterion for which the achievement of such liquidity event is not deemed probable for accounting purposes until the event occurs. The liquidity event‑related performance condition was achieved for the majority of our RSUs and became probable of being achieved for the remaining RSUs on April 27, 2017, the effective date of our IPO. We recognized stock‑based compensation expense using the accelerated attribution method with a cumulative catch‑up of stock‑based compensation expense in the amount of $181.5 million attributable to service prior to such effective date. Shares subject to RSUs in which the liquidity event-related performance condition was satisfied upon the effective date of the IPO will be issued on a date to be determined by the board of directors that will be after the second full trading day following the release of earnings by us for the second quarter of fiscal 2018 to the extent the service‑based condition has been met.
Prior to our IPO, stock‑based compensation expense was also recorded when a holder of an economic interest in Cloudera purchased shares from an employee for an amount in excess of the fair value of the common stock at the time of the purchase. We recognized any excess value transferred in these transactions as stock‑based compensation expense in the consolidated statement of operations.
Options and other equity awards granted to non‑employees are accounted for at their estimated fair value using the Black‑Scholes method. These awards are subject to periodic re‑measurement over the period during which services are rendered. Stock‑based compensation expense is recognized over the vesting period on a straight‑line basis.
Net Loss Per Share Attributable to Common Stockholders
We follow the two‑class method when computing net loss per common share as we issue shares that meet the definition of participating securities. The two‑class method determines net income (loss) per common share for each class of common stock and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two‑class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Prior to the automatic conversion into shares of common stock as a result of our IPO, our redeemable convertible preferred stock contractually entitled the

9


holders of such shares to participate in dividends, but did not contractually require the holders of such shares to participate in our losses. For periods in which we have reported net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti‑dilutive.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to retain the ability to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Recently Adopted Accounting Standards
In March 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016‑09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share‑Based Payment Accounting, or ASU 2016‑09, which simplifies the accounting and reporting of share‑based payment transactions, including adjustments to how excess tax benefits and payments for tax withholdings should be classified and provides the election to eliminate the estimate for forfeitures. For public entities, this standard is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. For all other entities, this standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any entity in any interim or annual period for which financial statements have not been issued or made available for issuance. We early adopted this standard in the first quarter of fiscal 2018. As a result of this adoption, we have elected to account for forfeitures as they occur. The adoption of this standard did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers (Topic 606), or ASU 2014‑09, which amended the existing FASB Accounting Standards Codification. ASU 2014‑09 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services and also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. For public entities, this standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  For all other entities, this standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted.
We are currently in the process of assessing the adoption methodology, which allows ASU 2014‑09 to be applied either retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application. Our final determination will depend on a number of factors, such as the significance of the impact of the new standard on our financial results, system readiness, including that of software procured from third‑party providers, and our ability to accumulate and analyze the information necessary to assess the impact on prior period financial statements, as necessary.
We are also currently evaluating the impact ASU 2014‑09 will have on our consolidated financial statements. We are in the initial stages of our evaluation of the impact of ASU 2014‑09 on our accounting policies, processes, and system requirements. We have assigned internal resources in addition to engaging third party service providers to assist in the evaluation. While we continue to assess all potential impacts under ASU 2014‑09, there is the potential for significant impacts on the timing of our revenue recognition and contract acquisition costs, such as sales commissions. Accounting for certain sales commissions under ASU 2014‑09 is different than our current

10


accounting policy which is to expense sales commissions as incurred whereas such costs will be deferred and amortized under ASU 2014‑09. Additionally, we preliminarily believe that the amortization period for such deferred commission costs will be longer than the contract term, as ASU 2014‑09 requires entities to determine whether the costs relate to specific anticipated contracts.
While we continue to assess the potential impacts of ASU 2014‑09, including the areas described above, and anticipate ASU 2014‑09 could have a material impact on our consolidated financial statements, we do not know and cannot reasonably estimate the quantitative impact on our financial statements at this time.
In May 2017, the FASB issued ASU No. 2017-09, Compensation Stock Compensation (Topic 718): Scope of Modification Accounting, or ASU 2017-09, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under ASU 2017-09, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This standard is effective for all entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the impact that this standard will have on our consolidated financial statements.
3.    Cash Equivalents and Marketable Securities
The following are the fair values of our cash equivalents and marketable securities as of July 31, 2017 (in thousands):
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Cash equivalents:(1)
 
 
 
 
 
 
 
Money market funds
$
6,173

 
$

 
$

 
$
6,173

Corporate notes and obligations
4,000

 

 

 
4,000

Commercial paper
15,097

 

 

 
15,097

Municipal securities
6,000

 

 
(1
)
 
5,999

Reverse repurchase agreements(2)
9,000

 

 

 
9,000

Marketable securities:
 
 
 
 
 
 
 
U.S. agency obligations
17,816

 

 
(4
)
 
17,812

Asset-backed securities
45,521

 

 
(22
)
 
45,499

Corporate notes and obligations
192,811

 
47

 
(105
)
 
192,753

Commercial paper
80,554

 
1

 
(1
)
 
80,554

Municipal securities
14,348

 
13

 
(3
)
 
14,358

Certificates of deposit
49,850

 
7

 
(3
)
 
49,854

U.S. treasury securities
5,985

 
1

 

 
5,986

Total cash equivalents and marketable
securities
$
447,155

 
$
69

 
$
(139
)
 
$
447,085

___________
(1)
Included in “cash and cash equivalents” in the accompanying consolidated balance sheet as of July 31, 2017.
(2)
As part of our cash management strategy, we invest in reverse repurchase agreements. Such reverse repurchase agreements are tri-party repurchase agreements and have maturities of three months or less at the time of investment and are collateralized by U.S. treasury securities at 102% of the principal amount. In a tri-party repurchase agreement, a third-party custodian bank functions as an independent intermediary to facilitate transfer of cash and holding the collateral on behalf of the underlying investor for the term of the agreement thereby minimizing risk and exposure to both parties. These reverse repurchase agreements are included within cash equivalents due to their high liquidity and relatively low risk.


11


The following are the fair values of our cash equivalents and marketable securities as of January 31, 2017 (in thousands):
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Estimated
Fair Value
Cash equivalents:(1)
 
 
 
 
 
 
 
Money market funds
$
49,390

 
$

 
$

 
$
49,390

U.S. agency obligations
3,249

 

 

 
3,249

Corporate notes and obligations
2,050

 

 

 
2,050

Commercial paper
3,998

 

 

 
3,998

Marketable securities:
 
 
 
 
 
 
 
Asset-backed securities
39,281

 

 
(17
)
 
39,264

Corporate notes and obligations
105,698

 
5

 
(116
)
 
105,587

Municipal securities
16,128

 

 
(23
)
 
16,105

Certificate of deposit
15,500

 
20

 

 
15,520

U.S. treasury securities
5,004

 

 

 
5,004

Total cash equivalents and marketable
securities
$
240,298

 
$
25

 
$
(156
)
 
$
240,167

___________
(1)
Included in “cash and cash equivalents” in the accompanying consolidated balance sheet as of January 31, 2017.
Maturities of our noncurrent marketable securities generally ranged from one to four years at both July 31, 2017 and January 31, 2017.
As of July 31, 2017, the following marketable securities were in an unrealized loss position (in thousands):
 
Less than 12 months
 
Greater than 12 months
 
Total
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
U.S. agency obligations
$
17,813

 
$
(4
)
 
$

 
$

 
$
17,813

 
$
(4
)
Asset-backed securities
44,278

 
(21
)
 
1,221

 
(1
)
 
45,499

 
(22
)
Corporate notes and obligations
106,474

 
(86
)
 
8,391

 
(19
)
 
114,865

 
(105
)
Commercial paper
14,980

 
(1
)
 

 

 
14,980

 
(1
)
Municipal securities
11,001

 
(3
)
 
1,974

 
(1
)
 
12,975

 
(4
)
Certificates of deposit
20,997

 
(3
)
 

 

 
20,997

 
(3
)
Total
$
215,543

 
$
(118
)
 
$
11,586

 
$
(21
)
 
$
227,129

 
$
(139
)
No marketable securities held as of January 31, 2017 had been in a continuous unrealized loss position for more than twelve months. The unrealized loss for each of these fixed rate marketable securities ranged from less than $1,000 to $15,000 as of July 31, 2017 and less than $1,000 to $26,000 as of January 31, 2017. We do not believe any of the unrealized losses represent an other‑than‑temporary impairment based on our evaluation of available evidence as of July 31, 2017 and January 31, 2017. We expect to receive the full principal and interest on all of these marketable securities and have the ability and intent to hold these investments until a recovery of fair value.
Realized gains and realized losses on our cash equivalents and marketable securities are included in other income (expense), net on the condensed consolidated statement of operations and were not material for the three and six months ended July 31, 2017 and 2016.
Reclassification adjustments out of accumulated other comprehensive loss into net loss were not material for the three and six months ended July 31, 2017 and 2016.

12


4.    Fair Value Measurement
Our financial assets and liabilities consist principally of cash and cash equivalents, marketable securities, restricted cash, accounts receivable, and accounts payable. We measure and record certain financial assets and liabilities at fair value on a recurring basis. The estimated fair value of accounts receivable and accounts payable approximates their carrying value due to their short‑term nature. Cash equivalents, marketable securities and restricted cash are recorded at estimated fair value.
All of our cash equivalents and marketable securities are classified within Level 1 or Level 2 because the cash equivalents and marketable securities are valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs.
We follow a three‑level valuation hierarchy for disclosure of fair value measurements as follows:
Level 1
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2
Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3
Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The following table represents our financial assets and liabilities according to the fair value hierarchy, measured at fair value as of July 31, 2017 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
6,173

 
$

 
$

 
$
6,173

Corporate notes and obligations
 
 
4,000

 
 
 
4,000

Commercial paper

 
15,097

 

 
15,097

Municipal securities

 
5,999

 

 
5,999

Reverse repurchase agreement

 
9,000

 

 
9,000

Marketable securities:
 
 
 
 
 
 
 
U.S. agency obligations

 
17,812

 

 
17,812

Asset-backed securities

 
45,499

 

 
45,499

Corporate notes and obligations

 
192,753

 

 
192,753

Commercial paper

 
80,554

 

 
80,554

Municipal securities

 
14,358

 

 
14,358

Certificates of deposit

 
49,854

 

 
49,854

U.S. treasury securities

 
5,986

 

 
5,986

Restricted cash:
 
 
 
 
 
 
 
Money market funds
14,672

 

 

 
14,672

Total financial assets
$
20,845

 
$
440,912

 
$

 
$
461,757


13


The following table represents our financial assets and liabilities according to the fair value hierarchy, measured at fair value as of January 31, 2017 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
49,390

 
$

 
$

 
$
49,390

U.S. agency obligations

 
3,249

 

 
3,249

Corporate notes and obligations

 
2,050

 

 
2,050

Commercial paper

 
3,998

 

 
3,998

Marketable securities:
 
 
 
 
 
 
 
Asset-backed securities

 
39,264

 

 
39,264

Corporate notes and obligations

 
105,587

 

 
105,587

Municipal securities

 
16,105

 

 
16,105

Certificate of deposit

 
15,520

 

 
15,520

U.S. treasury securities

 
5,004

 

 
5,004

Restricted cash:
 
 
 
 
 
 
 
Money market funds
15,446

 

 

 
15,446

Total financial assets
$
64,836

 
$
190,777

 
$

 
$
255,613

We value our Level 1 assets using quoted prices in active markets for identical instruments. We value our Level 2 assets with the help of a third‑party pricing service using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data, or pricing models such as discounted cash flow techniques. We use such pricing data as the primary input, to which we have not made any material adjustments during the periods presented, to make our determination and assessments as to the ultimate valuation of these assets.
There were no transfers into or out of Level 1, Level 2 or Level 3 assets and liabilities for the three and six months ended July 31, 2017 and 2016.
5.    Balance Sheet Components
Property and Equipment, Net
The cost and accumulated depreciation and amortization of property and equipment are as follows (in thousands):
 
As of
 
July 31, 2017
 
January 31, 2017
Computer equipment and software
$
18,165

 
$
17,981

Office furniture and equipment
5,956

 
4,350

Leasehold improvements
9,400

 
8,468

Construction in progress
2,310

 

Property and equipment, gross
35,831

 
30,799

Less: accumulated depreciation and amortization
(22,804
)
 
(17,695
)
Property and equipment, net
$
13,027

 
$
13,104

Construction in progress primarily consists of leasehold improvements that have not been placed into service as of July 31, 2017.
Depreciation expense was $2.4 million and $1.6 million for the three months ended July 31, 2017 and 2016, respectively, and $5.1 million and $3.1 million for the six months ended July 31, 2017 and 2016, respectively.

14


Intangible Assets
Intangible assets consisted of the following as of July 31, 2017 (dollars in thousands):
 
Gross Fair
Value
 
Accumulated
Amortization
 
Net Book
Value
 
Weighted Average
Remaining Useful Life
(in years)
Developed technology
$
10,155

 
$
(5,563
)
 
$
4,592

 
2.5
Customer relationships and other acquired intangible assets
6,125

 
(5,551
)
 
574

 
0.3
Total
$
16,280

 
$
(11,114
)
 
$
5,166

 
2.3
Intangible assets consisted of the following as of January 31, 2017 (dollars in thousands):
 
Gross Fair
Value
 
Accumulated
Amortization
 
Net Book
Value
 
Weighted Average
Remaining Useful Life
(in years)
Developed technology
$
10,155

 
$
(4,548
)
 
$
5,607

 
2.9
Customer relationships and other acquired intangible assets
6,125

 
(4,681
)
 
1,444

 
0.8
Total
$
16,280

 
$
(9,229
)
 
$
7,051

 
2.5
Amortization expense for intangible assets was $0.9 million for both the three months ended July 31, 2017 and 2016, and $1.9 million and $1.8 million for the six months ended July 31, 2017 and 2016, respectively.

The expected future amortization expense of these intangible assets as of July 31, 2017 is as follows (in thousands, by fiscal year):
Remaining six months of fiscal 2018
$
1,590

2019
2,031

2020
1,140

2021
347

2022
58

Total intangible assets, net
$
5,166

Accrued Compensation
Accrued compensation consists of the following (in thousands):
 
As of
 
July 31, 2017
 
January 31, 2017
Accrued salaries and benefits
$
3,234

 
$
2,330

Accrued bonuses
10,369

 
15,338

Accrued commissions
7,896

 
11,856

Employee stock purchase plan withholdings
3,861

 

Accrued compensation-related taxes and other
6,894

 
3,852

Total accrued compensation
$
32,254

 
$
33,376


15


Other Accrued Liabilities
Other accrued liabilities consists of the following (in thousands):
 
As of
 
July 31, 2017
 
January 31, 2017
Accrued taxes
$
2,241

 
$
1,585

Deferred real estate costs
523

 
47

Accrued professional costs
2,196

 
2,147

Customer deposits
252

 
301

Deferred sublease income
1,266

 
861

Accrued self-insurance costs
938

 
746

Other
8,254

 
4,231

Total other accrued liabilities
$
15,670

 
$
9,918

Other includes amounts owed to third‑party vendors that provide marketing, corporate event planning and cloud‑computing services.
6.    Commitments and Contingencies
Letters of Credit
As of both July 31, 2017 and January 31, 2017, we had a total of $19.9 million and $16.8 million, respectively, in letters of credit outstanding in favor of certain landlords for office space. These letters of credit renew annually and expire at various dates through 2027.
Operating Leases
We lease facilities space under non‑cancelable operating leases with various expiration dates. Future minimum lease payments and sublease proceeds under non-cancelable operating leases at July 31, 2017 are as follows (in thousands, by fiscal year):
 
Minimum Lease Payments
 
Sublease Rental Proceeds
 
Net Minimum Lease Payments
Remaining six months of fiscal 2018
$
7,131

 
(5,361
)
 
1,770

2019
31,903

 
(13,295
)
 
18,608

2020
33,525

 
(13,693
)
 
19,832

2021
33,562

 
(14,101
)
 
19,461

2022
30,700

 
(10,861
)
 
19,839

2023 and thereafter
159,884

 
(4,278
)
 
155,606

Total
$
296,705

 
$
(61,589
)
 
$
235,116

In February 2017, we entered into a new sublease agreement to sublet office space in Palo Alto, California. The sublease has a 45 month term commencing in the third quarter of fiscal 2018. Rental proceeds committed under this sublease are reflected above in the amounts of $1.6 million in fiscal 2018, $4.0 million in fiscal 2019, $4.1 million in fiscal 2020, $4.3 million in fiscal 2021 and $0.7 million in fiscal 2022.
In June 2017, we entered into a new non‑cancelable operating lease agreement to rent office space in San Francisco, California. The lease has an 87 months term, commences in January 2018 and ends in April 2025 with an option to renew for an additional 60 months. Total minimum lease payments under the lease agreement, included in

16


the table above, are $34.5 million, of which $0.4 million was required to be prepaid upon execution of the lease agreement.
Rental expense related to our non‑cancelable operating leases was approximately $3.3 million and $2.2 million for the three months ended July 31, 2017 and 2016, respectively, and $5.7 million and $4.1 million for the six months ended July 31, 2017 and 2016, respectively.
Deferred rent
We account for operating leases containing predetermined fixed increases of the base rental rate during the lease term on a straight‑line basis over the lease term. We recorded the difference between amounts charged to operations and amounts payable under our operating leases as deferred rent in the consolidated balance sheets.
Indemnification
From time to time, we enter into certain types of contracts that contingently require us to indemnify various parties against claims from third parties. These contracts primarily relate to (i) certain real estate leases under which we may be required to indemnify property owners for environmental and other liabilities and other claims arising from our use of the applicable premises, (ii) our bylaws, under which we must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship with us, (iii) contracts under which we must indemnify directors and certain officers for liabilities arising out of their relationship with us, (iv) contracts under which we may be required to indemnify customers or partners against certain claims, including claims from third parties asserting, among other things, infringement of their intellectual property rights, and (v) procurement, consulting, or license agreements under which we may be required to indemnify vendors, consultants or licensors for certain claims, including claims that may be brought against them arising from our acts or omissions with respect to the supplied products, technology or services. From time to time, we may receive indemnification claims under these contracts in the normal course of business. In addition, under these contracts we may have to modify the accused infringing intellectual property and/or refund amounts received.
In the event that one or more of these matters were to result in a claim against us, an adverse outcome, including a judgment or settlement, may cause a material adverse effect on our future business, operating results or financial condition. It is not possible to determine the maximum potential amount under these contracts due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.
We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and certain officers.
To date, we have not incurred any material costs, and have not accrued any liabilities in the consolidated financial statements as a result of these provisions.
Contingencies
In the ordinary course of business, we are or may be involved in a variety of litigation matters, suits, investigations, and proceedings, including actions with respect to intellectual property claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters. Regardless of the outcome, these litigation matters can have an adverse impact on us because of defense costs, diversion of management resources, harm to reputation, and other factors. In addition, it is possible that an unfavorable resolution of one or more such litigation matters could, in the future, materially and adversely affect our financial position, results of operations, and cash flows in a particular period or subject us to an injunction that could seriously harm our business.
We record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to our outstanding legal matters management believes that the amount or estimable range of possible loss will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against

17


us for amounts in excess of management’s expectations, our results of operations and financial condition including in a particular reporting period, could be materially adversely affected.
7.    Stockholders' Equity
Convertible Preferred Stock
There were no outstanding shares of convertible preferred stock as of July 31, 2017. Immediately prior to the closing of our IPO on May 3, 2017, all shares of our outstanding redeemable convertible preferred stock automatically converted into an aggregate of 74,907,415 shares of common stock and we reclassified $657.7 million from temporary equity to additional paid in capital on our condensed consolidated balance sheet.
Preferred Stock
In March 2017, our board of directors approved an increase to our authorized preferred stock to become effective on the closing of our IPO. At July 31, 2017 there were 20,000,000 shares of preferred stock, par value $0.00005, authorized and no shares of preferred stock issued and outstanding.
Common Stock
In March 2017 and April 2017, our board of directors and stockholders, respectively, approved an increase to our authorized common stock. At July 31, 2017 there were 1,200,000,000 shares of common stock, par value $0.00005, authorized and 131,250,336 shares of common stock issue and outstanding. The number of shares of common stock issued and outstanding at July 31, 2017 excludes 6,025,651 shares of common stock subject to RSUs that vested upon or subsequent to the effective date of our IPO and will be issued on a date to be determined by our board of directors. At January 31, 2017, there were 160,000,000 shares of common stock, par value $0.00005, authorized and 38,156,688 shares of common stock issue and outstanding.
8.    Stock Option Plans
We maintain two share-based compensation plans: the 2017 Equity Incentive Plan (2017 Plan), and the 2008 Equity Incentive Plan (2008 Plan) and collectively with the 2017 Plan, the Stock Plans. In March 2017, our board of directors adopted our 2017 Plan, which our stockholders approved in March 2017. The 2017 Plan became effective on April 27, 2017, the effective date of our IPO, and serves as the successor to our 2008 Plan. We do not expect to grant any additional awards under the 2008 Plan. Outstanding awards under the 2008 Plan continue to be subject to the terms and conditions of the 2008 Plan.
In March 2017, we increased the number of shares of common stock reserved for grant under the 2008 Plan by 2,000,000 shares.
In March 2017, we adopted the 2017 Plan with a reserve of 30,000,000 shares of our common stock for issuance under our 2017 Plan, plus an additional number of shares of common stock equal to any shares reserved but not issued or subject to outstanding awards under our 2008 Plan on the effective date of our 2017 Plan, plus, on and after the effective date of our 2017 Plan, (i) shares that are subject to outstanding awards under the 2008 Plan which cease to be subject to such awards, (ii) shares issued under the 2008 Plan which are forfeited or repurchased at their original issue price, and (iii) shares subject to awards under the 2008 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award. The number of shares reserved for issuance under our 2017 Plan will increase automatically on the first day of February of each calendar year during the term of the 2017 Plan by a number of shares of common stock equal to the lesser of (i) 5% of the total outstanding shares our common stock as of the immediately preceding January 31st or (ii) a number of shares determined by our board of directors.
As of July 31, 2017 there are 79,258,322 shares of common stock reserved and available for future issuance under the Stock Plans.

18


The Stock Plans provide for stock options to be granted at an exercise price not less than 100% of the fair market value at the grant date as determined by our board of directors, unless, with respect to incentive stock options, the optionee is a 10% stockholder, in which case the option price will not be less than 110% of such fair market value. Options granted generally have a maximum term of ten years from the grant date, are exercisable upon vesting unless otherwise designated for early exercise by the board of directors at the time of grant, and generally vest over a four year period, with 25% vesting after one year and then ratably on a monthly basis for the remaining three years.
The following tables summarize stock option activity and related information under the Stock Plans:
 
 
Options
Outstanding
 
Weighted-
Average
Exercise
Price
 
Weighted-Average Remaining
Contractual
Term
(Years)
 
Aggregate
Intrinsic
Value
 
 
 
 
 
 
 
 
(in thousands)
Balance — January 31, 2017
 
23,239,679

 
$
4.67

 
6.0

 
$
319,016

Granted
 
39,300

 
20.67

 

 

Exercised
 
(895,118
)
 
2.31

 

 

Canceled
 
(172,419
)
 
12.30

 

 

Balance — July 31, 2017
 
22,211,442

 
$
4.73

 
5.4

 
$
279,685

The total intrinsic value of options exercised during the six months ended July 31, 2017 and 2016 was $12.2 million and $12.4 million, respectively. The intrinsic value is the difference between the current fair market value of the stock for accounting purposes at the time of exercise and the exercise price of the stock option. As we have accumulated net operating losses, no future tax benefit related to option exercises has been recognized.
The weighted‑average grant‑date value for purposes of recognizing stock‑based compensation expense of employee options granted during the six months ended July 31, 2017 and 2016 was $8.83 and $10.24 per share, respectively.
The unamortized stock‑based compensation expense for options of $18.5 million at July 31, 2017 will be recognized over the average remaining vesting period of 1.7 years.
We issue RSUs to employees and directors under the Stock Plans. For new employee grants, the RSUs generally meet the service‑based condition over a four-year period, with 25% met after one year and then ratably on a quarterly basis for the remaining three years. For continuing employee grants, the RSUs generally meet the service‑based condition pro‑rata quarterly over the four‑year period (without a one‑year cliff).
The employee RSUs issued prior to our IPO under the 2008 Plan have two vesting conditions: (1) a service‑based condition and (2) a liquidity event‑related performance condition which is considered a performance‑based condition. On March 8, 2017, our board of directors modified the terms of the majority of our RSUs. Prior to the modification, if the liquidity event‑related performance condition was an IPO, employees were required to continue to provide service for six months following the effective date of an IPO. The modification removed the requirement, for the majority of RSUs, that the RSU recipient must continue to provide service for six months following the effective date of an IPO in order to vest in the award, with such shares to be issued on a date to be determined by our board of directors. All other significant terms of the RSUs remained unchanged. The modification established a new measurement date for these modified RSUs.
The liquidity event‑related performance condition was achieved for the majority of our RSUs and became probable of being achieved for the remaining RSUs on April 27, 2017, the effective date of our IPO. We recognized stock‑based compensation expense using the accelerated attribution method with a cumulative catch‑up of stock‑based compensation expense in the amount of $181.5 million attributable to service prior to such effective date.

19


Restricted stock activity for our Stock Plans is as follows:
 
Restricted Stock Units Outstanding
 
Number of
Restricted
Stock Units
 
Weighted-
Average
Grant Date
Fair Value
Per Share
Balance —January 31, 2017
21,374,022

 
$
22.36

Granted
3,531,520

 
16.55

Canceled
(666,479
)
 
16.43

Vested and converted to shares
(41,115
)
 
22.38

Balance —July 31, 2017
24,197,948

 
$
15.25

The unamortized stock‑based compensation expense for RSUs of $153.2 million at July 31, 2017 will be recognized over the average remaining vesting period of 1.6 years. The number of RSUs outstanding at July 31, 2017 in the table above includes 6,025,651 shares of common stock subject to RSUs that vested upon or subsequent to the effective date of our IPO and will be issued on a date to be determined by our board of directors.
2017 Employee Stock Purchase Plan
In March 2017, we adopted our 2017 Employee Stock Purchase Plan (ESPP). The ESPP became effective on April 27, 2017, the effective date of our IPO. Our ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the United States Internal Revenue Code of 1986, as amended (Code). Purchases will be accomplished through participation in discrete offering periods. The first offering period and purchase period began on April 27, 2017 and will end on December 20, 2017 (or such other date determined by our board of directors or our compensation committee). Each subsequent offering period will be for six months (commencing each June 21 and December 21) and will consist of one six‑month purchase period, unless otherwise determined by our board of directors or our compensation committee.
Under our ESPP, eligible employees will be able to acquire shares of our common stock by accumulating funds through payroll deductions. Our employees generally are eligible to participate in our ESPP if they are employed by us for at least 20 hours per week and more than five months in a calendar year. Employees who are 5% stockholders, or would become 5% stockholders as a result of their participation in our ESPP, are ineligible to participate in our ESPP. We may impose additional restrictions on eligibility. Our eligible employees are able to select a rate of payroll deduction between 1% and 15% of their base cash compensation. The purchase price for shares of our common stock purchased under our ESPP is 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period. No participant has the right to purchase shares of our common stock in an amount, when aggregated with purchase rights under all our employee stock purchase plans that are also in effect in the same calendar year(s), that has a fair market value of more than $25,000, determined as of the first day of the applicable purchase period, for each calendar year in which that right is outstanding. In addition, no participant is permitted to purchase more than 2,500 shares during any one purchase period or such lesser amount determined by our compensation committee or our board of directors. Once an employee is enrolled in our ESPP, participation will be automatic in subsequent offering periods. An employee’s participation automatically ends upon termination of employment for any reason.
We initially reserved 3,000,000 shares of our common stock for issuance under our ESPP. The number of shares reserved for issuance under our ESPP will increase automatically on February 1st of each of the first 10 calendar years following the first offering date by the number of shares equal to the lesser of either (i) 1% of the total outstanding shares of our common stock as of the immediately preceding January 31st (rounded to the nearest whole share) or (ii) a number of shares of our common stock determined by our board of directors. As of July 31, 2017$3.9 million has been withheld on behalf of employees for a future purchase under the ESPP and is recorded in other accrued compensation.

20


9.    Income taxes
Our quarterly income taxes reflect an estimate of our corresponding year’s annual effective tax rate and include, when applicable, adjustments for discrete items. For the six months ended July 31, 2017, our tax provision was $1.5 million, compared to $1.0 million for the same period a year ago. The tax provision for the six months ended July 31, 2017 primarily relates to income taxes of our non-U.S. operations as our U.S. operations were in a loss position and we maintain a full valuation allowance against our U.S. deferred tax assets.
10.    Related Party Transactions
Intel Corporation
We have been engaged in commercial transactions with Intel Corporation (Intel), a holder of our common stock, representing approximately 20% of outstanding shares as of July 31, 2017, with the right to designate a person that our board of directors must nominate for election, or nominate for re-election, to our board of directors, including a multi‑year subscription and services agreement, and a collaboration and optimization agreement. The aggregate revenue we recognized from Intel was $5.3 million and $3.9 million for the six months ended July 31, 2017 and 2016, respectively. There was $3.0 million and $2.3 million in accounts receivable due from Intel as of July 31, 2017 and January 31, 2017, respectively. There was $2.8 million and $2.1 million in deferred revenue as of July 31, 2017 and January 31, 2017, respectively.
Cloudera Foundation
In January 2017, the Cloudera Foundation, an independent non‑profit organization, was created to provide our products, skills and people, to help solve important social problems around the world. We donated 1,175,063 shares of our common stock to the Cloudera Foundation during the fourth quarter of fiscal 2017. In conjunction with the IPO, we donated $2.4 million, or 1% of the net proceeds, to fund the Cloudera Foundation’s activities. We do not control the Cloudera Foundation’s activities, and accordingly, we do not consolidate the financial statements of the Cloudera Foundation.
Other related parties
Certain members of our board of directors currently serve on the board of directors or as an executive of two companies that are our customers. The aggregate revenue we recognized from these customers was $3.4 million and $2.1 million for the six months ended July 31, 2017 and 2016, respectively. There was $0.6 million and $4.5 million in accounts receivable due from these customers as of July 31, 2017 and January 31, 2017, respectively. There was $5.7 million and $5.5 million in deferred revenue as of July 31, 2017 and January 31, 2017, respectively.
11.    Segment Information
The results of the reportable segments are derived directly from our management reporting system and are based on our methods of internal reporting which are not necessarily in conformity with GAAP. Management measures the performance of each segment based on several metrics, including contribution margin, as defined below. Management does not use asset information to assess performance and make decisions regarding allocation of resources. Therefore, depreciation and amortization expense is not allocated among segments.
Contribution margin is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Segment contribution margin includes segment revenue less the related cost of sales excluding certain operating expenses that are not allocated to segments because they are separately managed at the consolidated corporate level. These unallocated costs include stock‑based compensation expense, amortization of acquired intangible assets, direct sales and marketing costs, research and development costs, corporate general and administrative costs, such as legal and accounting, interest income, interest expense, and other income (expense).

21


Financial information for each reportable segment was as follows (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Subscription
$
73,986

 
$
50,688

 
$
138,657

 
$
91,360

Services
15,842

 
13,768

 
30,767

 
29,581

Total revenue
$
89,828

 
$
64,456

 
$
169,424

 
$
120,941


 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Contribution margin:
 
 
 
 
 
 
 
Subscription
$62,974
 
41,870

 
117,387

 
73,980

Services
2,977

 
2,592

 
4,599

 
7,195

Total segment contribution margin
$65,951
 
$44,462
 
$121,986
 
$81,175
The reconciliation of segment financial information to our loss from operations is as follows (in thousands):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Segment contribution margin
$
65,951

 
$
44,462

 
$
121,986

 
$
81,175

Amortization of acquired intangible assets
(941
)
 
(945
)
 
(1,885
)
 
(1,830
)
Stock-based compensation expense
(39,451
)
 
(5,578
)
 
(230,533
)
 
(11,241
)
Corporate costs, such as research and development, corporate general and administrative and other
(91,244
)
 
(76,726
)
 
(177,593
)
 
(150,407
)
Loss from operations
$
(65,685
)
 
$
(38,787
)
 
$
(288,025
)
 
$
(82,303
)
Sales outside of the United States represented approximately 28% and 23% of our total revenue for the three months ended July 31, 2017 and 2016, respectively, and 27% and 24% of our total revenue for the six months ended July 31, 2017 and 2016, respectively. All revenues from external customers are attributed to individual countries on an end‑customer basis, based on domicile of the purchasing entity, if known, or the location of the customer’s headquarters if the specific purchasing entity within the customer is unknown.
As of July 31, 2017 and January 31, 2017, assets located outside the United States were 2% and 3% of total assets, respectively.
12.    Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Numerator:
 
 
 
 
 
 
 
Net loss
$
(64,229
)
 
$
(38,727
)
 
$
(286,548
)
 
$
(81,840
)
Denominator:
 
 
 
 
 
 
 
Weighted-average shares used in computing net loss per share, basic and diluted
134,506

 
36,257

 
87,293

 
36,090

Net loss per share, basic and diluted
$
(0.48
)
 
$
(1.07
)
 
$
(3.28
)
 
$
(2.27
)

22


The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stockholders for the periods presented because their effect would have been anti‑dilutive (in thousands):
 
As of July 31,
 
2017
 
2016
Redeemable convertible preferred stock on an as-if converted basis

 
74,907

Stock options to purchase common stock
22,211

 
23,819

Restricted stock units
18,172

 
14,017

Shares issuable pursuant to the ESPP
1,004

 

Total
41,387

 
112,743

13.    Subsequent Events
In September 2017, we acquired Fast Forward Labs, a leading machine learning and applied artificial intelligence research company based in New York. This acquisition will be accounted for as a business combination. The estimated purchase price is not material.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Form 10-Q and in our other SEC filings. You should review the risk factors for a more complete understanding of the risks associated with an investment in our securities. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Our fiscal year end is January 31, and references throughout this Quarterly Report on Form 10-Q to a given fiscal year are to the twelve months ended on that date.
Overview
Cloudera empowers organizations to become data‑driven enterprises in the newly hyperconnected world. We have developed the leading modern platform for data management, machine learning and advanced analytics. We have achieved this position through extensive collaboration with the global open source community, continuous innovation in data management technologies and by leveraging the latest advances in infrastructure including the public cloud for “big data” applications. Our pioneering hybrid open source software (HOSS) model incorporates the best of open source with our robust proprietary software to form an enterprise‑grade platform. This platform delivers an integrated suite of capabilities for data management, machine learning and advanced analytics, affording customers an agile, scalable and cost‑effective solution for transforming their businesses. Offered on a subscription basis, our platform enables organizations to use vast amounts of data from a variety of sources, including the Internet of Things (IoT), to better serve and market to their customers, design connected products and services and reduce risk through greater insight from data.
We generate revenue primarily from sales of our term‑based subscriptions of our platform generally on a per node basis, whether deployed on‑premises or in the cloud. We also offer consumption‑based pricing for cloud‑based deployments. We also generate revenue from professional services and training.
We market and sell our platform to a broad range of organizations, although we focus our selling efforts on the largest 8,000 corporate enterprises globally (Global 8000) as well as large public sector organizations. We target these organizations because they capture and manage the vast majority of the world’s data and operate highly complex IT environments. We market our platform primarily through a direct sales force while benefiting from business driven by our ecosystem of technology partners, resellers, OEMs, MSPs, independent software vendors and systems integrators. Our total number of Global 8000 customers grew to 562 as of July 31, 2017 from 500 as of January 31, 2017.
We compile our Global 8000 list based upon the FORBES Global 2000 ranking of the top 2000 global enterprises as determined by FORBES. The remainder of our Global 8000 list is based on entities listed in Data.com as having the highest annual revenue, excluding those that are already listed in the FORBES Global 2000. For purposes of customer count, we define a customer as an entity with a unique FORBES Global 2000 or Data.com identifier and quarterly subscription revenue as of the measurement date. We update our list of Global 8000 customers periodically. Our customer count is subject to adjustments for acquisitions, spin‑offs and other market activity and previously disclosed numbers of customers are restated to allow for comparability. While we do not typically count multiple entities within a given Global 8000 customer as a new customer, we do make exceptions for holding companies and other organizations for which the FORBES Global 2000 or Data.com identifier in our

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Table of Contents

judgment does not accurately represent the Cloudera customer. The FORBES Global 2000 list is updated annually in the second quarter of the calendar year and we have since restated our previously disclosed numbers of customers to allow for comparability.
We have a broad customer base that spans industries and geographies. For the three and six months ended July 31, 2017 and 2016, no customer accounted for more than 10% of our total revenue. We have significant revenue in the banking and financial services, technology, business services, telecommunications, public sector, consumer and retail, and healthcare and life sciences verticals, and continue to expand our penetration across many other data‑intensive industries. Sales outside of the United States represented approximately 27%, and 24% of our total revenue for the six months ended July 31, 2017 and 2016, respectively.
Our business model is based on a “land and expand” strategy designed to use the initial sale as a foothold to increase revenue per customer by increasing the amount of data and number of use cases each customer runs through our platform. After an initial purchase of our platform, we work with our customers to identify new use cases that can be developed on or moved to our platform, ultimately increasing the amount of data managed on our platform as well as the number and size of our platform deployments.
To further illustrate the economics of our customer relationships, we have provided an analysis of our net expansion rate. Our quarterly net subscription revenue expansion rate equals:
the subscription revenue in a given quarter from end user customers that had subscription revenue in the same quarter of the prior year,
divided by
the subscription revenue attributable to that same group of customers in that prior quarter.
Our net expansion rate equals the simple arithmetic average of our quarterly net subscription revenue expansion rate for the four quarters ending with the most recently completed fiscal quarter. We have excluded Intel Corporation from our calculation of net expansion rate, as it is a related party. Our net expansion rate for the period ended July 31, 2017 was 140% as compared to 137% for the same period a year ago.
Components of Results of Operations
Revenue
We generate revenue primarily from the sale of subscriptions for our platform that our customers deploy either on‑premises or in the cloud, as well as the sale of services. Subscription revenue relates to term (or time‑based) subscriptions to our platform, which includes both open source and proprietary software. Our subscription arrangements are typically one to three years in length and we recognize subscription revenue ratably over the term of the subscription period. Our subscription includes internet, email and phone support, bug fixes and the right to receive unspecified software updates and upgrades released when and if available during the subscription term. Services revenue relates to professional services for the implementation and use of our subscriptions, customer training and education services, and related reimbursable travel costs.
Cost of Revenue
Cost of revenue for subscriptions primarily consists of personnel costs including salaries, bonuses, travel costs, benefits and stock‑based compensation for employees providing technical support for our subscription customers, allocated shared costs (including rent and information technology) and amortization of acquired intangible assets from business combinations. Cost of revenue for services primarily consists of personnel costs including salaries, bonuses, benefits and stock‑based compensation, fees to subcontractors associated with service contracts, travel costs and allocated shared costs (including rent and information technology). We expect cost of revenue to increase in absolute dollars for the foreseeable future as we continue to obtain new customers and expand our relationship with existing customers. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” during the six months ended July 31, 2017 our initial public offering (IPO) was declared effective and the performance-based condition for the restricted stock units (RSUs) was either achieved or probable of being

25

Table of Contents

achieved. As such we recognized a cumulative catch‑up of stock‑based compensation expense attributable to service prior to such effective date for RSUs.
Operating Expenses
Research and Development.  Research and development expenses primarily consist of personnel costs including salaries, bonuses, travel costs, benefits and stock‑based compensation for our research and development employees, contractor fees, allocated shared costs (including rent and information technology), supplies, and depreciation of equipment associated with the continued development of our platform prior to establishment of technological feasibility and the related maintenance of the existing technology. We expect our research and development expenses to increase in absolute dollars for the foreseeable future as we continue to enhance and add new technologies, features and functionality to our subscriptions. We also expect allocated shared costs to increase in future periods due to the commencement of the lease for our new headquarters in Palo Alto in July 2017. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” during the six months ended July 31, 2017 our IPO was declared effective and the performance-based condition for the RSUs was either achieved or probable of being achieved. As such we recognized a cumulative catch‑up of stock‑based compensation expense attributable to service prior to such effective date for RSUs.
Sales and Marketing.  Sales and marketing expenses primarily consist of personnel costs including salaries, bonuses, travel costs, sales‑based incentives, benefits and stock‑based compensation for our sales and marketing employees. In addition, sales and marketing expenses also includes costs for advertising, promotional events, corporate communications, product marketing and other brand‑building activities, allocated shared costs (including rent and information technology) and amortization of acquired intangible assets from business combinations. Sales‑based incentives are expensed as incurred. We expect our sales and marketing expenses to increase in absolute dollars as we continue to invest in selling and marketing activities to attract new customers and expand our relationship with existing customers. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” during the six months ended July 31, 2017 our IPO was declared effective and the performance-based condition for the RSUs was either achieved or probable of being achieved. As such we recognized a cumulative catch‑up of stock‑based compensation expense attributable to service prior to such effective date for RSUs.
General and Administrative.  General and administrative expenses primarily consist of personnel costs including salaries, bonuses, travel costs, benefits and stock‑based compensation for our executive, finance, legal, human resources, information technology and other administrative employees. In addition, general and administrative expenses include fees for third‑party professional services, including consulting, legal and accounting services and other corporate expenses, and allocated shared costs (including rent and information technology). We expect our general and administrative expenses to increase in absolute dollars due to the anticipated growth of our business and related infrastructure as well as legal, accounting, insurance, investor relations and other costs associated with becoming a public company. We also expect allocated shared costs to increase in future periods due to the commencement of the lease for our new headquarters in Palo Alto in July 2017. As discussed in detail below, see “—Significant Impacts of Stock‑based Compensation Expense,” during the six months ended July 31, 2017 our IPO was declared effective and the performance-based condition for the RSUs was either achieved or probable of being achieved. As such we recognized a cumulative catch‑up of stock‑based compensation expense attributable to service prior to such effective date for RSUs.
Interest Income, net
Interest income primarily relates to amounts earned on our cash and cash equivalents and marketable securities.
Other Income, net
Other income, net primarily relates to foreign currency transactions, realized gains and losses on our marketable securities, and other non‑operating gains or losses.

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Table of Contents

Provision for Income Taxes
Provision for income taxes primarily consists of state and foreign income taxes. Due to cumulative losses, we maintain a valuation allowance against our deferred tax assets. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets.
Significant Impacts of Stock‑Based Compensation Expense
We have granted RSUs to our employees and members of our board of directors under our 2008 Equity Incentive Plan (2008 Plan). The employee RSUs vest upon the satisfaction of both a service‑based condition and a liquidity event‑related performance condition. The service‑based vesting condition for these awards is generally satisfied pro‑rata over four years. The liquidity event‑related performance vesting condition is satisfied upon the occurrence of a qualifying event, such as the effective date of an IPO, or six months following the effective date of an IPO.
The liquidity event‑related performance condition was achieved for the majority of our RSUs and probable of being achieved for the remaining RSUs on April 27, 2017, the effective date of our IPO. We recognized stock‑based compensation expense using the accelerated attribution method with a cumulative catch‑up of stock‑based compensation expense in the amount of $181.5 million attributable to service prior to such effective date. The shares will be issued on a date to be determined by the board of directors that will be on or after the second full trading day following the release of earnings by us for the second quarter of fiscal 2018.
Results of Operations
The following table sets forth our results of operations for the periods indicated:
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
 
(in thousands)
Revenue:
 
 
 
 
 
 
 
Subscription
$
73,986

 
$
50,688

 
$
138,657

 
$
91,360

Services
15,842

 
13,768

 
30,767

 
29,581

Total revenue
89,828

 
64,456

 
169,424

 
120,941

Cost of revenue:(1) (2)
 
 
 
 
 
 
 
Subscription
15,215

 
9,706

 
41,687

 
19,057

Services
16,755

 
11,633

 
50,395

 
23,317

Total cost of revenue
31,970

 
21,339

 
92,082

 
42,374

Gross profit
57,858

 
43,117

 
77,342

 
78,567

Operating expenses:(1) (2)
 
 
 
 
 
 
 
Research and development
42,844

 
26,635

 
138,675

 
51,150

Sales and marketing
62,135

 
46,902

 
172,578

 
93,044

General and administrative
18,564

 
8,367

 
54,114

 
16,676

Total operating expenses
123,543

 
81,904

 
365,367

 
160,870

Loss from operations
(65,685
)
 
(38,787
)
 
(288,025
)
 
(82,303
)
Interest income, net
1,440

 
708

 
2,089

 
1,448

Other income (expense), net
817

 
(178
)
 
839

 
(15
)
Net loss before provision for income taxes
(63,428
)
 
(38,257
)
 
(285,097
)
 
(80,870
)
Provision for income taxes
(801
)
 
(470
)
 
(1,451
)
 
(970
)
Net loss
$
(64,229
)
 
$
(38,727
)
 
$
(286,548
)
 
$
(81,840
)

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Table of Contents

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

 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
 
(in thousands)
Cost of revenue – subscription
$
3,693

 
$
374

 
$
19,393

 
$
708

Cost of revenue – services
3,890

 
457

 
24,227

 
931

Research and development
13,128

 
1,458

 
81,029

 
3,013

Sales and marketing
12,137

 
1,474

 
72,678

 
3,033

General and administrative
6,603

 
1,815

 
33,206

 
3,556

Total stockbased compensation expense
$
39,451

 
$
5,578

 
$
230,533

 
$
11,241

(2)
Amounts include amortization of acquired intangible assets as follows:

 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
 
(in thousands)
 
 
 
 
Cost of revenue – subscription
$
510

 
$
514

 
$
1,024

 
$
969

Sales and marketing
431

 
431

 
861

 
861

Total amortization of acquired intangible assets
$
941

 
$
945

 
$
1,885

 
$
1,830



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Table of Contents

The following table sets forth selected consolidated statements of operations data for each of the periods indicated as a percentage of total revenue:
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Subscription
82
 %
 
79
 %
 
82
 %
 
76
 %
Services
18

 
21

 
18

 
24

Total revenue
100

 
100

 
100

 
100

Cost of revenue(1) (2): 
 
 
 
 
 
 
 
Subscription
17

 
15

 
24

 
16

Services
19

 
18

 
30

 
19

Total cost of revenue
36

 
33

 
54

 
35

Gross margin
64

 
67

 
46

 
65

Operating expenses(1) (2):
 
 
 
 
 
 
 
Research and development
48

 
41

 
82

 
42

Sales and marketing
69

 
73

 
102

 
77

General and administrative
20

 
13

 
32

 
14

Total operating expenses
137

 
127

 
216

 
133

Loss from operations
(73
)
 
(60
)
 
(170
)
 
(68
)
Interest income, net
1

 
1

 
1

 
1

Other income (expense), net
1

 

 
1

 

Net loss before provision for income taxes
(71
)
 
(59
)
 
(168
)
 
(67
)
Provision for income taxes
(1
)
 
(1
)
 
(1
)
 
(1
)
Net loss
(72
)%
 
(60
)%
 
(169
)%
 
(68
)%
___________
(1)
Amounts include stock‑based compensation expense as a percentage of total revenue as follows:
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Cost of revenue – subscription
4
%
 
1
%
 
11
%
 
1
%
Cost of revenue – services
4

 
1

 
14

 
1

Research and development
15

 
2

 
48

 
2

Sales and marketing
14

 
2

 
43

 
2

General and administrative
7

 
3

 
20

 
3

Total stockbased compensation expense
44
%
 
9
%
 
136
%
 
9
%
(2)
Amounts include amortization of acquired intangible assets as a percentage of total revenue as follows:
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2017
 
2016
 
2017
 
2016
Cost of revenue – subscription
1
%
 
1
%
 
1
%
 
1
%
Sales and marketing

 

 

 
1

Total amortization of acquired intangible assets
1
%
 
1
%
 
1
%
 
2
%


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Table of Contents


Three and Six Months Ended July 31, 2017 and 2016
Revenue
 
Three Months Ended July 31,
 
Change
 
Six Months Ended July 31,
 
Change
 
2017
 
2016
 
Amount
 
%
 
2017
 
2016
 
Amount
 
%
 
(dollars in thousands)
Subscription
$
73,986

 
$
50,688