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TABLE OF CONTENTS
Index to Consolidated Financial Statements

As filed with the U.S. Securities and Exchange Commission on March 11, 2013

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT

Under
The Securities Act of 1933

Rally Software Development Corp.
(Exact name of registrant as specified in its charter)

Delaware	7372	84-1597294
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

3333 Walnut Street
Boulder, CO 80301
(303) 565-2800
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Timothy A. Miller
Rally Software Development Corp.
3333 Walnut Street
Boulder, CO 80301
(303) 565-2800
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:
Michael L. Platt John T. McKenna Francis R. Wheeler Cooley LLP 380 Interlocken Crescent, Suite 900 Broomfield, CO 80021 (720) 566-4000	Alan F. Denenberg Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, CA 94025 (650) 752-2000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.    o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer ý (Do not check if a smaller reporting company)	Smaller reporting company o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)		Amount of Registration Fee
Common Stock, $0.0001 par value per share	$	70,000,000	$	9,548.00

(1)

Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the offering price of any additional shares that the underwriters have the option to purchase.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated March 11, 2013

PROSPECTUS

                    Shares

Common Stock

        This is an initial public offering of shares of common stock of Rally Software Development Corp. We are offering                        shares of our common stock to be sold in the offering. Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on The New York Stock Exchange under the symbol "RALY."

        It is currently estimated that the initial public offering price per share will be between $        and $        .

We are an "emerging growth company" under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves risks. See "Risk Factors" beginning on page 11 before you consider buying shares of our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$

        To the extent that the underwriters sell more than                shares of common stock, the underwriters have the option to purchase up to an additional                shares from us at the initial public offering price less the underwriting discount.

        The underwriters expect to deliver the shares of common stock to purchasers on                        , 2013.

Deutsche Bank Securities Piper Jaffray

Needham & Company JMP Securities William Blair

Prospectus dated                        , 2013

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	11
Special Note Regarding Forward-Looking Statements	30
Market, Industry and Other Data	31
Use of Proceeds	32
Dividend Policy	32
Capitalization	33
Dilution	36
Selected Consolidated Financial Data	38
Management's Discussion and Analysis of Financial Condition and Results of Operations	41
Business	68
Management	83
Executive Compensation	90
Certain Relationships and Related Party Transactions	102
Principal Stockholders	105
Description of Capital Stock	109
Shares Eligible for Future Sale	115
Material U.S. Federal Tax Considerations for Non-U.S. Holders	118
Underwriting	122
Legal Matters	128
Experts	128
Where You Can Find Additional Information	128
Index to Consolidated Financial Statements	F-1

        Neither we nor the underwriters have authorized anyone to provide you with any additional information or information that is different from that contained in this prospectus or any related free writing prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. Our business, financial condition, results of operations and prospects may have changed since that date.

Through and including                        , 2013 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

        No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to those jurisdictions.

        This document has been prepared on the basis that any offer of shares in any relevant European Economic Area member state will be made pursuant to an exemption under European prospectus law from the requirement to publish a prospectus for offers of shares and does not constitute an offer or solicitation to anyone to purchase shares in any jurisdiction in which such offer or solicitation is not authorized nor to any person to whom it is unlawful to make such an offer or solicitation.

        Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, including independent data, research opinions and viewpoints published by Forrester Research, Inc., or Forrester, Gartner, Inc., or Gartner, International Data Corporation, or IDC, and The Standish Group International, Incorporated, or the Standish Group, on assumptions that we have made that are based on those and other similar sources and on our knowledge of the markets for our solutions. See the section titled "Market, Industry and Other Data" for further information.

i

PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus but may not contain all of the information that you consider important in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Unless the context requires otherwise, the words "Rally," "we," "company," "us" and "our" refer to Rally Software Development Corp. and its subsidiaries. We have a January 31 fiscal year end. Accordingly, all references in this prospectus to a fiscal year refer to the twelve months ended January 31 of such year, and references to the first, second, third and fourth fiscal quarters refer to the three months ended April 30, July 31, October 31 and January 31, respectively.

RALLY SOFTWARE DEVELOPMENT CORP.

Company Overview

        Rally Software is a leading global provider of cloud-based solutions for managing Agile software development. Our platform transforms the way organizations manage the software development lifecycle by enabling close alignment of software development and strategic business objectives, facilitating collaboration, increasing transparency, and automating manual processes. Organizations use our solutions to accelerate the pace of innovation, improve productivity and more effectively adapt to rapidly-changing customer needs and competitive dynamics. Our enterprise-class platform is extensible, cost-effective and designed to be easy to use. Agile is a software development methodology characterized by short, iterative and highly-adaptable development cycles. Since its introduction in 2001, organizations have increasingly adopted Agile. The Standish Group estimates that Agile techniques were used for 29% of new software development projects in 2011. As of October 31, 2012, we had 154,982 paid users and more than 1,000 customers, including 36 of the Fortune 100 companies.

        Software continues to rapidly proliferate, enabling product innovation and driving many of today's key technology trends, including cloud computing, mobility and social networking. According to Gartner, the total worldwide revenue for software (application, infrastructure and vertical-specific) was estimated to be approximately $372 billion in 2011. Software has traditionally been developed using manual processes or legacy techniques, such as the "waterfall" method, which are often characterized by rigid and lengthy development cycles and frequently fail to produce software that meets customer needs. Today, these legacy methodologies are being disrupted and replaced by Agile practices that improve time-to-market, reduce development costs and produce higher quality software that better meets customer expectations.

        We are a pioneer in management solutions for Agile software development. We provide a common platform on which organizations can collaborate across globally-distributed software development teams, solicit ideas and feedback from customers, and gain transparency into Agile software development projects. Our solutions automate and optimize activities such as project planning and scheduling, resource allocation, quality management and reporting on progress and cost, enabling users to manage the entire Agile software development lifecycle. Our cloud-based platform of management solutions is designed to address the application lifecycle market, which IDC defines as comprising the software configuration management, IT project and portfolio management, and automated software quality markets. In aggregate, IDC estimated these markets would reach $5.2 billion in 2012. While the application lifecycle market today is largely served by legacy offerings, we believe that as enterprises increase their use of Agile techniques for new software development projects Agile software offerings will continue to see increased market adoption.

1

        We have achieved significant growth since inception. From fiscal 2011 to fiscal 2012, our subscription and support revenue grew from $19.9 million to $31.1 million, representing a 56% year-over-year growth rate. For the nine months ended October 31, 2011 and 2012, our subscription and support revenue grew from $22.2 million to $31.4 million, representing a 41% period-over-period growth rate. We primarily sell our solutions through one-year subscriptions. For fiscal 2012, our renewal rate among existing customers was 129%, taking into account paid seat nonrenewals, upgrades and downgrades.

        From fiscal 2011 to fiscal 2012, our total revenue grew from $29.7 million to $41.3 million, representing a 39% year-over-year growth rate. For the nine months ended October 31, 2011 and 2012, our total revenue grew from $30.1 million to $41.4 million, representing a 38% period-over-period growth rate. We recorded net losses of $9.9 million, $11.6 million and $6.7 million in fiscal 2011, 2012 and the nine months ended October 31, 2012, respectively.

Industry Background and Market Challenges

        The strategic importance of software to organizations continues to grow and companies are increasingly looking to software as the core technology differentiating and enabling their businesses and products. Software is driving many of today's key technology trends, including cloud computing, mobility and social networking. Software embedded in products is also transforming numerous sectors, including the communications, healthcare and manufacturing industries. Organizations are challenged to develop their business applications and software-driven products faster, better and in a more cost-effective way. To successfully innovate, compete and grow, organizations require expertise and solutions to adapt to rapidly-changing customer needs and competitive dynamics.

        Many enterprises utilize manual processes and unsophisticated tools, such as paper-based techniques and spreadsheets, to manage workflow throughout the software development lifecycle. These techniques are generally more appropriate for smaller development projects managed by a single team and cannot scale to meet the needs of enterprises and multi-team projects. In the 1970s, the waterfall method gained prominence as the preferred way to manage large software development projects. This approach, which can take many months or years to complete, relies on rigid sequential execution of the various phases of the software development lifecycle, including analysis, design, coding, integration and final testing. Enterprises employing the waterfall method often structure internal departments around each development stage and use different legacy software tools for each phase and department, leading to siloed and disparate information, limited transparency and collaboration between teams, and heightened risk of misalignment between software development and business initiatives.

        Agile was introduced by a small group of software visionaries in 2001 through an open letter. It represented a new methodology for software creation and delivery designed to reduce costs and significantly improve time-to-market, quality and customer satisfaction. Agile projects build software incrementally, in small batches, using short iterations of one to four weeks that help keep development aligned with changing business needs. Agile is increasingly replacing waterfall processes across many industries because of the significantly improved results it can deliver. According to the Standish Group, software applications developed using Agile techniques have three times the success rate of applications developed using the traditional waterfall method. The Standish Group defines a successful project as one delivered on time, on budget, and with the required features and functions.

        Organizations that develop business applications and software-related products face a number of challenges that are often directly attributable to legacy software development techniques and the management tools that enable these approaches, such as:

•

shortening time-to-market and rising customer expectations;

•

limited transparency into large development projects;

•

insufficient collaboration among developers, business leaders and customers; and

•

inflexible, costly and difficult-to-use offerings.

2

Our Solutions

        Our cloud-based platform is designed to facilitate adoption of Agile practices by enabling organizations to manage the shorter, faster cycles that characterize Agile software development processes. Organizations use our solutions to accelerate the pace of innovation, improve productivity and more effectively adapt to rapidly-changing customer needs and competitive dynamics. We believe our solutions benefit customers in the following ways:

•

Accelerate the pace of innovation and improve software quality.  Organizations use our platform to optimize their software development activities and manage the greater frequency of software features and functions that are produced by using Agile techniques. Our platform also helps organizations identify errors earlier in the software development lifecycle and enables their prompt remediation, leading to higher-quality code and fewer process delays.

•

Provide greater transparency.  Our solutions provide real-time visibility into a project's progress and costs, work streams, resource allocation, capacity and other aspects of the software development process. Our platform collects data from disparate sources and integrates it into a single repository, enabling a holistic view of the Agile software development lifecycle. We also offer analytics and reporting capabilities that transform this data into actionable intelligence, enabling users to make better business decisions.

•

Enhance collaboration and facilitate rapid feedback.  Our solutions enable development teams, business leaders and customers to collaborate and rapidly share ideas and content through an intuitive user interface. This allows development teams to obtain feedback earlier and more often so they can adapt to changing business and customer requirements. Users of our solutions can achieve increased productivity, closer alignment between software development and business initiatives, reduction in unused code and greater customer satisfaction.

•

Easy and cost-effective to try, use and adopt.  Customers can easily access our cloud-based solutions with an Internet browser and begin using our platform in minutes. The cloud-based version of our platform is cost effective to adopt compared to on-premise offerings as it avoids large up-front software expenditures and does not require significant infrastructure or IT support.

•

Configurable and extensible.  Our platform enables customers to easily configure our solutions to meet their unique and evolving needs. Our configuration functionality provides customers the ability to change the appearance and operation of the user interface and dashboards to meet the specific requirements of users, development teams, projects, departments and business leaders.

Our Competitive Strengths

        The following competitive strengths are keys to our success:

•

Broad enterprise-class solutions portfolio.  Our platform is designed to support organizations with thousands of distributed users and to easily scale to handle large and complex Agile software development projects. Our broad portfolio of enterprise-class solutions helps development organizations manage the entire software development lifecycle, from idea through quality testing. We believe this provides us with a significant advantage over competitors that focus on small and medium businesses or have discrete, point offerings.

•

Leader in Agile with deep domain expertise.  Since our inception, we have focused on the management of Agile software development and we possess deep capabilities and expertise on the subject. For example, we believe we were the first vendor to offer a cloud-based Agile project management solution and an Agile portfolio management solution.

3

•

Large, diverse base of enterprise customers.  As of October 31, 2012, we had more than 1,000 customers in a wide variety of industries including 36 of the Fortune 100 companies. We believe many of our enterprise customers view us as a key strategic solutions provider and we achieve high customer satisfaction. We believe this has allowed us to expand our footprint within enterprises and support the ongoing adoption of Agile software development.

•

Cloud-based platform and subscription business model.  Our cloud-based solutions are principally offered on a subscription basis over the Internet. Our multi-tenant architecture enables us to run a single instance of our software code, add subscribers with minimal incremental expense, and deploy new functionality and upgrades quickly and efficiently.

•

Large direct sales organization with global reach.  Our global sales organization is focused on adding new customers and expanding relationships with existing customers. We believe our team is the world's largest sales organization selling cloud-based solutions for the management of Agile software development.

•

Corporate culture committed to collaboration and performance.  We regard our culture as a key differentiator and performance driver. We believe our highly-collaborative culture gives us a competitive advantage in recruiting and retaining talent, driving innovation, enhancing productivity and improving customer satisfaction.

Our Growth Strategy

        Our objective is to be the world's leading provider of Agile management solutions. The key elements to our growth strategy include:

•

Increase sales to existing customers.  We employ a land-and-expand go-to-market strategy. As of October 31, 2012, we had over 1,000 customers in a wide variety of industries and we believe a significant opportunity exists to sell them additional subscriptions and solutions.

•

Acquire new customers.  We believe the market for Agile management solutions is large, growing and underpenetrated. We plan to increase our global sales force and expand our partner ecosystem to drive new customer acquisition.

•

Continue to innovate.  We utilize Agile software development practices to rapidly innovate and bring new solutions to market. We will continue to invest in research and development to further extend and enhance the functionality of our Agile management solutions.

•

Expand our international presence.  For the nine months ended October 31, 2012, approximately 13% of our revenue was derived from international customers. We believe there is a significant opportunity to increase our revenue abroad, particularly in Europe and emerging markets in Asia and South America, and we plan to open new sales offices in these regions.

•

Increase market awareness and drive adoption of Agile practices and our solutions.  We offer a free version of our platform, which allows customers to evaluate the benefits of our solutions. We also provide Agile resources, such as analyst reports, host our annual RallyON user conference and sponsor other regional and industry events. We believe these initiatives promote awareness of Agile practices, increase our potential customer base and encourage adoption of our solutions.

•

Pursue selective strategic acquisitions.  We intend to opportunistically pursue acquisitions of complementary businesses, technologies and capabilities.

4

Risks Associated with Our Business

        Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled "Risk Factors" immediately following this prospectus summary. Some of these risks are:

•

We have a history of losses, expect to incur future losses as we grow our company and may be unable to achieve or sustain profitability;

•

Our success depends on the continued adoption of Agile software development;

•

Demand for Agile management solutions may not grow as we anticipate;

•

Our growth is largely dependent on our ability to retain and secure additional subscriptions from existing customers, and nonrenewals and downgrades could harm our future operating results;

•

If we are unable to continue to attract new customers, our growth could be slower than we expect;

•

We recognize revenue from customer subscriptions over the term of a subscription agreement; therefore, a significant downturn in our business may not be immediately reflected in our operating results;

•

We may not be able to compete successfully against current and future competitors;

•

Our quarterly results may fluctuate and, if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially; and

•

Our existing directors, executive officers and principal stockholders will continue to have substantial control over us after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control.

If we are unable to adequately address these and other risks we face, our business, financial condition, operating results and prospects may be adversely affected.

        In addition, we are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012, and therefore we may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. We may take advantage of these exemptions for up to five years or until we are no longer an "emerging growth company."

Corporate Information

        We were incorporated in Delaware in July 2001 under the name F4 Technologies, Inc. and changed our name to Rally Software Development Corp. in April 2004. Our principal executive offices are located at 3333 Walnut Street, Boulder, CO 80301, and our telephone number is (303) 565-2800. Our website address is www.rallydev.com. The information contained in, or that can be accessed through, our website is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our common stock. We have included our website address in this prospectus solely as an inactive textual reference.

        Rally, the Rally logo and other trademarks or service marks of Rally appearing in this prospectus are the property of Rally. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders.

5

THE OFFERING

Common stock offered	shares
Common stock to be outstanding after this offering	shares
Option to purchase additional shares	shares
Use of proceeds	We intend to use the net proceeds from this offering for working capital and other general corporate purposes. In addition, we may use a portion of the net proceeds from this offering for acquisitions of, or investments in, complementary companies, products or technologies. See the section titled "Use of Proceeds."
Risk factors	You should read the section titled "Risk Factors" and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
Proposed NYSE symbol	"RALY"

        The number of shares of common stock to be outstanding after this offering is based on 41,208,562 shares of our common stock (including preferred stock on an as-converted basis) outstanding as of October 31, 2012, and excludes:

•

4,551,224 shares of common stock issuable upon exercise of stock options outstanding as of October 31, 2012, at a weighted-average exercise price of $1.43 per share;

•

121,002 shares of common stock issuable upon exercise of warrants to purchase shares of common stock outstanding as of October 31, 2012, at a weighted-average exercise price of $0.14 per share, which warrants will automatically "net exercise" immediately prior to the closing of this offering if not exercised prior thereto;

•

344,127 shares of common stock issuable upon exercise of warrants to purchase shares of our preferred stock outstanding as of October 31, 2012, at a weighted-average exercise price of $1.28 per share;

•

296,226 additional shares of common stock reserved as of October 31, 2012 for future issuance under our Amended and Restated 2002 Stock Option Plan;

•

additional shares of common stock reserved for future issuance under our 2013 Equity Incentive Plan, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement related to this offering; and

•

shares of common stock reserved for future issuance under our 2013 Employee Stock Purchase Plan, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement related to this offering.

6

        Unless we specifically state otherwise, all information in this prospectus reflects or assumes:

•

the      for      reverse split of our common stock and preferred stock;

•

that our amended and restated certificate of incorporation, which we will file in connection with the closing of this offering, and our amended and restated bylaws are effective;

•

the conversion of all outstanding shares of our preferred stock into an aggregate of 35,839,731 shares of common stock immediately prior to the closing of this offering; and

•

no exercise of the underwriters' option to purchase additional shares of common stock.

7

SUMMARY CONSOLIDATED FINANCIAL DATA

        The following consolidated financial data should be read together with our consolidated financial statements and related notes and the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus. We have derived the following consolidated statements of operations data for the fiscal years ended January 31, 2010, 2011 and 2012 from our audited consolidated financial statements contained elsewhere in this prospectus. The consolidated statements of operations data for the nine months ended October 31, 2011 and 2012 and consolidated balance sheet data as of October 31, 2012 have been derived from our unaudited consolidated financial statements contained elsewhere in this prospectus. We have prepared the unaudited financial information on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, we consider necessary for a fair statement of the financial information set forth in those statements. Our historical results are not necessarily indicative of our future results and our results for the nine months ended October 31, 2012 are not necessarily indicative of the results to be expected for the full fiscal year.

        The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31.

	Fiscal Year Ended January 31,									Nine Months Ended October 31,
	2010			2011			2012			2011			2012
										(unaudited)
	(dollars in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue:
Subscription and support	$	12,897		$	19,902		$	31,124		$	22,214		$	31,406
Perpetual license		1,334			4,260			3,546			2,763			4,270
Total product revenue		14,231			24,162			34,670			24,977			35,676
Professional services		4,142			5,548			6,655			5,092			5,677
Total revenue		18,373			29,710			41,325			30,069			41,353
Cost of revenue:
Product(1)		1,990			3,033			4,096			3,052			3,816
Professional services(1)		3,373			4,846			5,679			4,291			5,296
Total cost of revenue		5,363			7,879			9,775			7,343			9,112
Gross profit		13,010			21,831			31,550			22,726			32,241
Operating expenses:
Sales and marketing(1)		13,407			18,526			23,552			17,061			20,769
Research and development(1)		5,230			7,979			11,074			8,173			10,697
General and administrative(1)		3,875			5,074			8,170			5,897			7,592
Sublease termination income(2)		—			—			—			—			(839	)
Total operating expenses		22,512			31,579			42,796			31,131			38,219
Loss from operations		(9,502	)		(9,748	)		(11,246	)		(8,405	)		(5,978	)
Interest and other income (expense), net		(244	)		(191	)		(346	)		(353	)		(754	)
Net loss		(9,746	)		(9,939	)		(11,592	)		(8,758	)		(6,732	)
Preferred stock accretion		(67	)		(81	)		(22	)		(22	)		—
Preferred stock deemed dividend(3)		—			—			(762	)		(762	)		—
Net loss attributable to common stockholders	$	(9,813	)	$	(10,020	)	$	(12,376	)	$	(9,542	)	$	(6,732	)
Net loss per common share, basic and diluted(4)	$	(3.18	)	$	(2.78	)	$	(2.65	)	$	(2.07	)	$	(1.31	)
Weighted-average common shares outstanding, basic and diluted(4)		3,085,962			3,610,442			4,678,414			4,600,963			5,152,788
Pro forma net loss per share (unaudited)(4)							$	(0.29	)				$	(0.15	)
Pro forma weighted-average common shares used to compute pro forma net loss per share (unaudited)(4)								39,481,931						40,992,519
Key Metrics (unaudited):
Total paid seats(5)		49,883			79,375			116,899			107,689			154,982
Renewal rate(6)		129	%		132	%		129	%		126	%		123	%

8

(1)

Includes stock-based compensation as follows:

	Fiscal Year Ended January 31,						Nine Months Ended October 31,
	2010		2011		2012		2011		2012
							(unaudited)
	(in thousands)
Cost of product revenue	$	5	$	6	$	10	$	6	$	11
Cost of professional services revenue		6		9		17		12		16
Sales and marketing		46		57		124		83		142
Research and development		48		56		93		63		127
General and administrative		66		65		324		199		394
	$	171	$	193	$	568	$	363	$	690

(2)

In April 2012, the sublease for our corporate headquarters was terminated as a result of the sale of the building by the building's owner. The transaction was deemed a termination of the original lease and we derecognized the remaining deferred rent expense. See Note 14 of our consolidated financial statements for additional information.

(3)

In August 2011, we repurchased 377,812 shares of our preferred stock. The difference between the carrying value of the shares of preferred stock and their estimated fair value was deemed to be a dividend. See Note 8 of our consolidated financial statements for additional information.

(4)

See Note 12 of our consolidated financial statements for a discussion and reconciliation of historical and pro forma net loss attributable to common stockholders and weighted-average common shares outstanding for historical and pro forma basic and diluted net loss per share calculations.

(5)

Represents the number of total paid seats at period end. We define a paid seat as a seat with a subscription or support contract as of the measurement date. In the case of a contract that allows a customer to provision an unlimited number of seats, total paid seats includes an estimate of the total number of seats to be provisioned during the term of the contract. Total paid seats as of October 31, 2012 includes 7,700 in seat upgrades pursuant to such contracts. For more information, see the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics."

(6)

Represents our renewal rate for the trailing twelve-month period ended as of the specified period end. We calculate our renewal rate by comparing the number of paid seats of all of our existing customers at the beginning of a twelve-month period to the number of paid seats for those same customers at the end of such period, taking into account nonrenewals, upgrades and downgrades. We exclude seats sold to new customers. For more information, see the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics."

9

	As of October 31, 2012
	Actual			Pro Forma(1)		Pro Forma As Adjusted(2)(3)
	(unaudited) (in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	19,604		$	19,604
Working capital, excluding current deferred revenue		25,705			25,705
Total assets		35,772			35,772
Deferred revenue, current and long-term		29,883			29,883
Preferred stock warrant liability		1,643			—
Convertible preferred stock		68,410			—
Total stockholders' equity (deficit)		(69,557	)		496

(1)

The pro forma column reflects (i) the conversion of all outstanding shares of our preferred stock into 35,839,731 shares of our common stock immediately prior to the closing of this offering, (ii) the reclassification of the preferred stock warrant liability to stockholders' equity (deficit) immediately prior to the closing of this offering and (iii) the filing of our amended and restated certificate of incorporation.

(2)

The pro forma as adjusted column further reflects the sale by us of        shares of our common stock at an assumed initial public offering price of $        per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

Each $1.00 increase (decrease) in the assumed initial public offering price of $        per share would increase (decrease) the amount of cash and cash equivalents, working capital, total assets and total stockholders' equity (deficit) by approximately $         million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. Similarly, each increase (decrease) of one million shares in the number of shares of our common stock offered by us would increase (decrease) the amount of cash and cash equivalents, working capital, total assets and total stockholders' equity (deficit) by approximately $         million, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

10

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information included in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock. If any of the following risks actually occurs, our business, financial condition, results of operations and future growth prospects could be harmed. In that case, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Our Industry

We have a history of losses, expect to incur future losses as we grow our company and may be unable to achieve or sustain profitability.

        We have been in existence since 2001 and have experienced net losses in each year since our inception. We experienced net losses of $9.7 million, $9.9 million and $11.6 million in fiscal 2010, 2011 and 2012, respectively, and $6.7 million for the nine months ended October 31, 2012. As of October 31, 2012, we had an accumulated deficit of $71.5 million. We are at an early stage in the development of our business and much of our growth has occurred in recent periods. Our historical rates of revenue growth may not be sustainable. We expect to make significant expenditures to support and grow our business, including investing in our data center infrastructure, expanding our sales force and increasing our international presence. In addition, as a public company we will incur significant legal, accounting and other expenses that we did not incur as a private company. Furthermore, we may encounter unforeseen expenses, complications and other difficulties. We expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability. Our limited operating history may make it difficult for you to evaluate our current business and our future prospects.

Our success depends on the continued adoption of Agile software development.

        We do not know whether Agile adoption will continue to grow and displace traditional methods of software development. In particular, many organizations have invested substantial personnel and financial resources to integrate legacy software development techniques, such as waterfall techniques, into their businesses over time, and may be reluctant or unwilling to migrate to Agile practices because of the organizational changes often required to successfully implement this methodology. Further, some organizations may not realize the expected benefits from adoption of Agile practices and, as a result, may discontinue adoption of those practices. Agile adoption may also be limited if other software development techniques emerge. If Agile software development techniques are not adopted as broadly and quickly as we expect, our growth may slow or stall and our operating results would be harmed.

Demand for Agile management solutions may not grow as we anticipate.

        Our solutions have not yet gained broad market acceptance. Even if adoption of Agile software development techniques continues to grow, the market for solutions that enable companies to manage software development processes may not increase at the pace we expect or at all. Organizations may choose to manage Agile software development manually or utilize other offerings that render our solutions uncompetitive or obsolete.

Our growth is largely dependent on our ability to retain and secure additional subscriptions from existing customers, and nonrenewals and downgrades could harm our future operating results.

        We primarily sell our solutions through one-year subscriptions. We typically negotiate the total number of seats a customer is entitled to provision as part of their subscription, but these seats may not be fully utilized over the term of the agreement. Upon expiration, customers can renew their existing subscriptions, upgrade their subscriptions, downgrade their subscriptions or not renew. Our

11

ability to grow revenue and achieve profitability depends in part on customer renewals and upgrades exceeding downgrades and nonrenewals. Our land-and-expand go-to-market strategy requires that a significant portion of our customers who initially purchase our solutions will subsequently upgrade their subscriptions. However, we may not be able to increase our penetration within our existing customers as anticipated and we may not otherwise retain subscriptions from existing customers. Customers may choose to not renew or upgrade their subscriptions, or may downgrade, because of several factors, including dissatisfaction with our prices or features relative to competitive offerings, reductions in our customers' spending levels, unused seats previously purchased, limited adoption by a customer of our solutions or Agile practices, departure of Agile users from the customer's organization or other causes. If our customers do not upgrade or renew their subscriptions, or they downgrade their subscriptions, our revenue may grow more slowly than expected or may decline, and our profitability and gross profit may be harmed.

If we are unable to continue to attract new customers, our growth could be slower than we expect.

        We believe that our future growth depends in part upon increasing our customer base. Our ability to achieve significant growth in revenue in the future will depend, in part, upon continually attracting new customers and obtaining subscription renewals to our solutions from those customers. If we fail to attract new customers our revenue may grow more slowly than expected and our business may be harmed.

We recognize revenue from customer subscriptions over the term of a subscription agreement; therefore, a significant downturn in our business may not be immediately reflected in our operating results.

        We recognize revenue from subscription agreements ratably over the terms of these agreements, which are typically one year. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods, which is reflected as deferred revenue on our balance sheet. Consequently, a decline in new or renewed subscriptions, or a downgrade of renewed subscriptions to fewer seats or less-expensive editions, in any one quarter may not be fully reflected in our revenue in that quarter, and may negatively affect our revenue in future quarters. If contracts having significant value expire and are not renewed or replaced at the beginning of a quarter or are downgraded, our revenue may decline significantly in that quarter and subsequent quarters.

Because we generally recognize revenue from our customers over the terms of their agreements but incur most costs associated with generating such agreements upfront, rapid growth in our customer base may reduce our profitability in the short term.

        Expenses, such as sales commissions, are generally incurred upfront; however most of our revenue is recognized over the life of the applicable agreements. Therefore, increased sales will result in our recognition of more costs than revenue during the early periods covered by such agreements, even in cases where the agreements are expected to be profitable for us over their full terms. As a result, our short-term operating results may suffer.

Our gross profit attributable to professional services may fluctuate between quarters.

        We generally recognize revenue from professional services on a time-and-materials basis as services are delivered. Costs associated with maintaining a professional services department are fixed while professional services revenue is dependent on the amount of work actually billed to customers in a period, the combination of which may result in variability in our gross profit. Our gross profit can also be impacted depending on the type of services provided. In addition, the timing of the recognition of professional services revenue is dependent on several factors outside our control. If a customer deploys our solutions and utilizes our services more slowly than we expect, we may not be able to recognize the

12

related revenue as quickly as we anticipated, but may have already incurred substantial costs related to such services, creating further variability in our gross profit.

We may not be able to compete successfully against current and future competitors.

        We face intense competition in the market for our solutions and we expect competition to further intensify in the future. We primarily face competition from potential customers electing to use in-house offerings, privately-held Agile management vendors and software development tool providers, and providers of open source offerings. We also compete with large, diversified software and technology vendors and, as the market further adopts Agile practices, we expect increased competition from these vendors. Our competitors vary in size and in the breadth and scope of the products and services offered. Our primary competitors include private companies such as Atlassian, CollabNet and VersionOne and public companies such as Hewlett-Packard, IBM and Microsoft, some of which can bundle competing products and services with other software offerings, or offer them at a lower price as part of a larger sale. Further, other companies not currently offering Agile management tools may enter our market. Many of our current and potential competitors have substantially greater resources and brand recognition, established marketing relationships, access to larger customer bases, pre-existing customer relationships and major distribution agreements with consultants, system integrators and resellers. We also face competition from other companies that provide Agile consulting services and enterprises that develop in-house Agile training resources. To the extent competition intensifies, demand for our professional services may decline.

        In addition, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. We may also lose customers that merge with or are acquired by companies using a competitor's offering, an internally-developed tool or a different software development methodology. If we cannot compete successfully against our current and future competitors, our business may be harmed.

Our growth and long-term success depends in part on our ability to expand our international sales.

        A core component of our growth strategy is international expansion. For the nine months ended October 31, 2012, approximately 13% of our revenue was derived from international customers. We currently maintain international offices and have sales, marketing, support or research and development personnel in the United Kingdom, Australia, Finland and the Netherlands. We also have sales personnel in Canada and Germany. We intend to further build out our international operations. Our international expansion efforts may not be successful. In addition, conducting international operations in new markets subjects us to new risks that we have not generally faced in the United States. These risks include:

•

uncertain political and economic climates, especially in Europe;

•

lack of familiarity and burdens of complying with foreign laws, accounting and legal standards, regulatory requirements, tariffs, and other barriers;

•

unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

•

lack of experience in connection with the localization of our solutions, including translation into foreign languages and adaptation for local practices and regulatory requirements;

•

difficulties in managing systems integrators and technology collaborators;

•

difficulties in adapting to differing technology standards;

•

longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

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•

difficulties in managing and staffing international operations and differing legal and cultural expectations for employee relationships;

•

fluctuations in exchange rates that may increase the volatility of our foreign-based expenses;

•

potentially adverse tax consequences, including the complexities of foreign value-added tax, goods and services tax and other transactional taxes, and restrictions on the repatriation of earnings;

•

reduced or varied protection for intellectual property rights in some countries; and

•

difficulties in managing and adapting to differing cultures and customs.

        Further, our international expansion efforts may be hindered by lower levels of Agile or cloud adoption and increased price sensitivity for our solutions or other cloud-based offerings in international markets. As a result of these and other factors, international expansion may be more difficult, take longer and not generate the results we anticipate, which could negatively impact our growth and business.

Prices for our solutions may face downward pressure, harming our operating results.

        There are many factors that may lead to downward pressure on our prices, including competitors introducing lower-cost offerings, additional competitors entering the market, the use by potential or existing customers of alternative open source or other no or low cost offerings and larger competitors bundling competing offerings with additional products and services. In addition, we offer volume price discounts based on the number of seats purchased. As a result of these factors, we may be forced to reduce the prices we charge for our solutions, unable to renew existing customer agreements or enter into new customer agreements at the same prices and upon the same terms as we have historically been able to. If we experience downward pressure on pricing, our revenue, gross profit and other operating results could be harmed.

Sales cycles to our customers can be lengthy and variable, which may cause changes in our operating results.

        Our sales cycle can vary substantially from customer to customer. A number of factors influence the length and variability of our sales cycles, including, for example:

•

the need to educate potential customers about the uses and benefits of Agile methods and our solutions;

•

the discretionary nature of potential customers' purchasing and budget cycles and decisions;

•

the competitive nature of potential customers' evaluation and purchasing processes;

•

the functionality demands of potential customers;

•

the announcement or planned introduction of new products by us or our competitors; and

•

the purchasing approval processes of potential customers.

        Our sales cycles can make it difficult to predict the quarter in which revenue from a new customer may first be recognized. We may incur significant sales and marketing expenses and invest significant time and effort in anticipation of a sale that may never occur or only occur in a smaller amount or at a later date than anticipated. Delays inherent to our sales cycles could cause significant variability in our revenue and operating results for any particular period.

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The seasonality of our business can create significant variance in our quarterly bookings, perpetual license revenue and cash flow from operations.

        Our customers tend to follow budgeting cycles, buying solutions at the beginning and end of a calendar year. We tend to experience some seasonality associated with bookings, perpetual license revenue and cash flow from operations in the first and fourth quarters of each fiscal year. As a result of these seasonal variations, our bookings, perpetual license revenue and cash flow from operations can fluctuate significantly between quarters. Our cash flow from operations has historically been higher in the first quarter of each fiscal year than in other quarters. If our quarterly operating results or outlook fall below the expectations of research analysts or investors, the price of our common stock could decline substantially.

If we fail to manage our growth effectively, we may be unable to execute our business plan and maintain high levels of service.

        We increased our number of full-time employees from 155 as of January 31, 2010, to 232 as of January 31, 2011 and to 285 as of January 31, 2012, and our revenue grew from $18.4 million in fiscal 2010, to $29.7 million in fiscal 2011 and to $41.3 million in fiscal 2012. Our growth has placed, and is expected to continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. We intend to add and expend additional resources in an effort to further expand our overall business, customer base, headcount and operations both domestically and internationally, but can give no assurance that our business or revenue will continue to grow at historical rates or at all. Creating a global organization and managing a geographically-dispersed workforce will require substantial management effort, the allocation of valuable management resources and significant additional investment in our infrastructure. If we are unable to successfully manage our anticipated growth, our financial results may suffer.

Failure to maintain and expand our direct sales team may negatively impact our revenue growth.

        We primarily sell our solutions through our direct sales force. Growing sales to both new and existing customers is in part dependent on our ability to expand our sales force. Identifying, recruiting and training additional sales personnel requires significant time, expenses and attention. If we are unable to hire, develop and retain sales personnel or if our new direct sales personnel are unable to achieve expected sales productivity levels in a reasonable period of time or at all, we may not be able to increase our revenue and grow our business.

If we are unable to increase market awareness of our company and our solutions, our revenue may not continue to grow, or may decline.

        Market awareness of our capabilities and solutions is essential to our ability to generate new leads for expanding our business and our continued growth. If we fail to sufficiently invest in our marketing programs or they are unsuccessful in creating market awareness of our company and solutions, our business may be harmed.

Adverse economic conditions or reduced IT or enterprise software spending may adversely impact our business.

        Our business depends on the overall demand for IT and enterprise software spend and on the economic health of our current and prospective customers. In general, worldwide economic conditions remain unstable, and these conditions make it difficult for us, and our existing customers and prospective customers, to forecast and plan future business activities accurately, and they could cause our customers or prospective customers to reevaluate their decision to purchase our solutions. Weak global economic conditions, or a reduction in IT or enterprise software spending even if economic conditions improve, could harm our business in a number of ways, including longer sales cycles and lower prices for our solutions.

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Security breaches may harm our business.

        Any security breaches, unauthorized access, unauthorized usage, virus or similar breach or disruption could result in loss of confidential information, damage to our reputation, early termination of our contracts, litigation, regulatory investigations or other liabilities. If our security measures or those of our third-party data centers are breached as a result of third-party action, employee error, malfeasance or otherwise and, as a result, someone obtains unauthorized access to customer data, our reputation will be damaged, our business may suffer and we could incur significant liability.

Our business is substantially dependent upon the continued adoption of cloud-based software solutions.

        We derive, and expect to continue to derive, substantially all of our revenue from the sale of subscriptions for our cloud-based platform. We do not know whether the trend of adoption of enterprise cloud-based software solutions we have experienced in the past will continue in the future. Many organizations have invested substantial personnel and financial resources to integrate on-premise software tools into their businesses, and some have been reluctant or unwilling to migrate to cloud-based software solutions. Furthermore, some organizations, particularly enterprises upon which we are dependent, have been reluctant or unwilling to use cloud-based solutions because they have concerns regarding the risks associated with the security of their data and the reliability of the technology delivery model associated with these solutions. In addition, if we or other cloud-based providers experience security incidents, loss of customer data, disruptions in delivery or other problems, the market for cloud-based software solutions as a whole, including for our solutions, may be negatively impacted. If the adoption of cloud-based software solutions does not continue at the rate we anticipate, the market for these solutions may stop developing or may develop more slowly than we expect, either of which would harm our operating results.

If we fail to adequately manage our data-center infrastructure capacity, our existing customers may experience service outages and our new customers may experience delays in the deployment of our platform.

        We have experienced significant growth in the number of users and amount of data that our hosting infrastructure supports. We seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. However, the provisioning of new data-center infrastructure requires lead time. If we do not accurately predict our infrastructure capacity requirements with sufficient lead time, our customers could experience service impairment that may subject us to financial penalties and liabilities and cause us to lose customers. If our data-center infrastructure capacity fails to keep pace with increased subscriptions, customers may experience delays or reductions in the quality of our service as we seek to obtain additional capacity, which could harm our reputation and harm our business.

Any disruption of service at the two data centers that house our equipment and deliver our solutions could harm our business.

        Our users expect to be able to access our solutions 24 hours a day, seven days a week, without interruption. We have computing and communications hardware operations located in co-location data centers owned and operated by a third party in Denver, Colorado and in the Seattle, Washington area. We do not control the operation of these data centers and we are therefore vulnerable to any security breaches, power outages or other issues the data centers experience. We have experienced and expect that we will in the future experience interruptions, delays and outages in service and availability from time to time. For example, we experienced a partial data center outage for greater than 30 minutes that affected all of our customers three times in fiscal 2013 and once in February 2013 at our Denver, Colorado data center.

        The owner of our data centers has no obligation to renew its agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable

16

terms, we may be required to move to new data centers, and we may incur significant costs and possible service interruption in connection with doing so.

        Our data centers are vulnerable to damage or interruption from human error, malicious acts, earthquakes, hurricanes, tornados, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. One of our data centers is located in an area known for seismic activity, increasing our susceptibility to the risk that an earthquake could significantly harm the operations of this facility. The occurrence of a natural disaster or an act of terrorism, vandalism or other misconduct, a decision to close the data centers without adequate notice or other unanticipated problems could result in lengthy interruptions in availability of our solutions.

        Any changes in third-party service levels at our data centers or any errors, defects, disruptions or other performance problems with our solutions could harm our reputation and may damage our customers' businesses. Interruptions in availability of our solutions might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their subscriptions or decide not to renew their subscriptions with us.

Our success depends on our ability to adapt to technological change and continue to innovate.

        The market for Agile management solutions is characterized by rapid technological change, frequent new product and service introductions and evolving industry standards. Our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to introduce new solutions and enhance and improve existing solutions. To achieve market acceptance for our solutions, we must effectively anticipate and offer solutions that meet changing customer demands in a timely manner. Customers may require features and capabilities that our current solutions do not have. We may experience difficulties that could delay or prevent our development, introduction or implementation of new solutions and enhancements.

        If we are unable to successfully develop or acquire new Agile management capabilities and functionality, enhance our existing solutions to anticipate and meet customer preferences, sell our solutions into new markets or adapt to changing industry standards in software development methodologies, our revenue and results of operations would be adversely affected.

If we fail to integrate our solutions with software applications and competitive or adjacent offerings that are developed by others, our solutions may become less marketable, less competitive or obsolete, and our operating results would be harmed.

        Our solutions integrate with a variety of software applications, and also with competing and adjacent third-party offerings, and we need to continuously modify and enhance our platform to adapt to changes in cloud-enabled hardware, software, networking, browser and database technologies. Any failure of our solutions to interoperate effectively with software applications and other Agile management offerings could reduce the demand for our solutions or result in customer dissatisfaction and harm to our business. If we are unable to respond to changes in the applications and tools with which our solutions interoperate in a cost-effective manner, our solutions may become less marketable, less competitive or obsolete. Competitors may also impede our attempts to create interoperability between our solutions and competitive offerings, which may decrease demand for our solutions.

We could incur substantial costs as a result of any claim of infringement of another party's intellectual property rights.

        In recent years, there has been significant litigation involving patents and other intellectual property rights in the software industry. Companies providing software are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement claims. We do not have a significant patent portfolio, which could prevent us

17

from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. The risk of patent litigation has been amplified by the increase in the number of a type of patent holder, which we refer to as a non-practicing entity, whose sole business is to assert such claims and against whom our own intellectual property portfolio may provide little deterrent value. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third party that claims that our solutions infringe its rights, the litigation could be expensive and could divert our management resources.

        In addition, in most instances, we have agreed to indemnify our customers against claims that our solutions infringe the intellectual property rights of third parties. Our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligations to them. Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:

•

cease selling or using solutions that incorporate the intellectual property that we allegedly infringe;

•

make substantial payments for legal fees, settlement payments or other costs or damages;

•

obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or

•

redesign the allegedly infringing solutions to avoid infringement, which could be costly, time-consuming or impossible.

        If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or actions could harm our business.

We could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual property could impair our business.

        We seek to protect the source code for our proprietary software and other proprietary technology and information under a combination of copyright, trade secrets and patent law, and we seek to protect our brand through trademark law. Our policy is to enter into confidentiality agreements, or agreements with confidentiality provisions, with our employees, consultants, vendors and customers and to control access to our software, documentation and other proprietary information. Despite these precautions, it may be possible for unauthorized parties to copy our software or other proprietary technology or information, or to develop similar software independently.

        Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our solutions or to obtain and use information that we regard as proprietary. Policing unauthorized use of our solutions, especially the on-premise, installed version of our solutions, is difficult, and we are unable to determine the extent to which piracy of our software exists or will occur in the future. Litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others or defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming and distracting to management, result in a diversion of resources, the narrowing or invalidation of portions of our intellectual property and have a material adverse effect on our business, operating results and financial condition. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that we infringe the counterclaimant's own intellectual property. These steps may be inadequate to protect our intellectual property. Third parties may challenge the validity or ownership of our intellectual property, and these challenges could cause us to lose our rights, in whole

18

or in part, to such intellectual property or narrow its scope such that it no longer provides meaningful protection. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our solutions may be unenforceable under the laws of certain jurisdictions and foreign countries. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying, transfer and use of our solutions and proprietary technology or information may increase.

        There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology. If we fail to meaningfully protect our intellectual property, our business, brand, operating results and financial condition could be materially harmed.

We rely on third-party software that is required for the development and deployment of our solutions, which may be difficult to obtain or which could cause errors or failures of our solutions.

        We rely on software licensed from or hosted by third parties to offer our solutions. In addition, we may need to obtain licenses from third parties to use intellectual property associated with the development of our solutions, which might not be available to us on acceptable terms, or at all. Any loss of the right to use any software required for the development, maintenance and delivery of our solutions could result in delays in the provision of our solutions until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. Any errors or defects in third-party software could result in errors or a failure of our solutions which could harm our business.

If our solutions contain serious errors or defects we may lose revenue and market acceptance and may incur costs to defend or settle product liability claims.

        Complex software applications such as ours often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Our current and future solutions may contain serious defects, which could result in lost revenue or a delay in market acceptance.

        Since our customers use our solutions for critical business purposes, defects or other performance problems could negatively impact our customers. They could seek significant compensation from us for the losses they suffer. Although our customer agreements typically contain provisions designed to limit our exposure to such claims, existing or future laws or unfavorable judicial decisions could negate these limitations. Even if not successful, a product liability claim brought against us would likely be a distraction to management, time-consuming and costly to resolve, and could seriously damage our reputation in the marketplace, making it harder for us to sell our solutions and professional services.

Our quarterly operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline and you may lose part or all of your investment.

        Our quarterly operating results may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly operating results or outlook fall below the expectations of research analysts or investors, the price of our common stock could decline substantially. Fluctuations in our quarterly operating results or outlook may be due to a number of factors, including, but not limited to, those listed below:

•

the extent to which our existing customers purchase additional subscriptions to our solutions or perpetual licenses to our solutions and the timing and terms of those purchases;

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•

the extent to which our existing customers renew their subscriptions for our solutions or maintenance for our solutions and the timing and terms of those renewals;

•

the extent to which new customers are attracted to our solutions to satisfy their Agile management needs;

•

the rate of adoption and market acceptance of Agile management solutions;

•

the mix of our revenue, particularly between perpetual licenses and subscriptions for which the timing of revenue recognition is substantially different;

•

the extent to which we enter into multi-year contracts, in which the fees are typically paid upfront;

•

the addition or loss of large customers, including through acquisitions or consolidations;

•

the number and size of new customers and the number and size of renewals in a particular period;

•

changes in our pricing policies or those of our competitors;

•

changes in the gross profit we realize on our solutions and professional services due to our differing revenue recognition policies applicable to perpetual licenses and subscription and support revenue and other variables;

•

the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure;

•

the timing and success of new solutions introduced by us or new offerings offered by our competitors;

•

the length of our sales cycles;

•

other changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic collaborators;

•

the timing of expenses related to the development of new products and technologies, including enhancements to our solutions;

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the timing of commissions earned by our sales personnel;

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our ability to manage our existing business and future growth, including increases in the number of customers on our platform;

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the seasonality of our business;

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the timing and expenses related to any international expansion efforts we may undertake and the success of such efforts;

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various factors related to disruptions in our cloud-based infrastructure, defects in our solutions, privacy and data security and exchange rate fluctuations, each of which is described elsewhere in these risk factors; and

•

general economic, industry and market conditions.

        We believe that our quarterly revenue and operating results may vary significantly in the future and that period-to-period comparisons of our operating results may not be meaningful. You should not rely on the results of one quarter as an indication of future performance.

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Perpetual license revenue is unpredictable and a material increase or decrease in perpetual license revenue from period-to-period can produce substantial variation in the total revenue we recognize in a given period.

        We generally recognize perpetual license revenue upon delivery of our solutions to the customer. The timing of sales of perpetual licenses is difficult to predict and, as a result, the timing of recognition of associated revenue is unpredictable. A material increase or decrease in the sale of perpetual licenses from period to period could produce substantial variation in the revenue we recognize. Accordingly, comparing our perpetual license revenue on a period-to-period basis may not be a meaningful indicator of a trend or future results.

Fluctuations in the exchange rate of foreign currencies could result in currency transactions losses.

        We currently do not invoice customers in foreign currency but may decide to do so in the future. We incur a portion of our operating expenses in Euros, British pounds sterling, Australian dollars and Canadian dollars, and in the future as we expand into other foreign countries, we expect to incur operating expenses in other foreign currencies. Any fluctuation in the exchange rate of these foreign currencies may negatively impact our business, financial condition and operating results. We have not previously engaged in foreign currency hedging. If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets.

Changes in laws or regulations related to the Internet may diminish the demand for our solutions and could have a negative impact on our business.

        We deliver our cloud-based solutions through the Internet. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting data privacy and the use of the Internet. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the Internet or on commerce conducted via the Internet. These laws or charges could limit the viability of Internet-based solutions such as ours and reduce the demand for our solutions.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.

        Our solutions are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department's Office of Foreign Assets Controls. Exports of our solutions must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including: the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. In addition, changes in our solutions or changes in applicable export or import regulations may create delays in the introduction and sale of our solutions in international markets, prevent our customers with international operations from deploying our solutions or, in some cases, prevent the export or import of our solutions to certain countries, governments or persons altogether. Any change in export or import regulations, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could also result in decreased use of our solutions, or in our decreased ability to export or sell our solutions to existing or potential customers with international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions would likely adversely affect our business.

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        Furthermore, we incorporate encryption technology into certain of our solutions. Various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our solutions or could limit our customers' ability to implement our solutions in those countries. Encrypted solutions and the underlying technology may also be subject to export control restrictions. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our failure to obtain required import or export approval for our solutions, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of our solutions, including with respect to new releases of our solutions, may create delays in the introduction of our solutions in international markets, prevent our customers with international operations from deploying our solutions throughout their globally-distributed systems or, in some cases, prevent the export of our solutions to some countries altogether.

        Moreover, U.S. export control laws and economic sanctions programs prohibit the shipment of certain products and services to countries, governments and persons that are subject to U.S. economic embargoes and trade sanctions. Even though we take precautions to prevent our solutions from being shipped or provided to U.S. sanctions targets, our solutions and services could be shipped to those targets or provided by third parties despite such precautions. Any such shipment could have negative consequences, including government investigations, penalties and reputational harm.

Our use of open source software could negatively affect our ability to sell our solutions and subject us to possible litigation.

        A portion of our technologies incorporate open source software, and we expect to continue to incorporate open source software in the future. Few of the licenses applicable to open source software have been interpreted by courts, and their application to the open source software integrated into our proprietary software may be uncertain. Moreover, we cannot provide assurance that we have not incorporated additional open source software in our software in a manner that is inconsistent with the terms of the license or our current policies and procedures. If we fail to comply with these licenses, we may be subject to certain requirements, including requirements that we offer our solutions that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contained the open source software and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our solutions. In addition, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming infringement due to the reliance by our solutions on certain open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our solutions.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and comply with Securities and Exchange Commission regulations and investors' views of us.

        Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the

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preparation of financial statements in accordance with generally accepted accounting principles. In connection with this offering, we intend to begin the process of documenting, reviewing and improving our internal controls and procedures for compliance with Section 404(a) of the Sarbanes-Oxley Act of 2002, which will require annual management assessment of the effectiveness of our internal control over financial reporting. We may need additional finance and accounting personnel with certain skill sets to assist us with the reporting requirements we will encounter as a public company and to support our anticipated growth. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the SEC following the date we are no longer an "emerging growth company" as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Our remediation efforts may not enable us to avoid a material weakness in the future. We will remain an "emerging growth company" for up to five years, although, we would cease to be an "emerging growth company" upon the earliest of (i) the first fiscal year following the fifth anniversary of this offering, (ii) the first fiscal year after our annual gross revenue is $1 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (iv) the date on which we are deemed to be a "large accelerated filer" as defined in the Securities Exchange Act of 1934.

        Implementing changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors' perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our solutions to new and existing customers.

We are an "emerging growth company," and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies including, but not limited to (i) not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and (iii) exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and to obtain stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. We will incur additional expenses when we eventually are required to comply with the requirements applicable to a public company that is not an emerging growth company. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less-active trading market for our common stock and our stock price may be more volatile.

        Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourself of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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We may acquire other companies, which may divert our management's attention, result in additional dilution to our stockholders and consume resources that are necessary to sustain our business, and we may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions.

        We may evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products and other assets in the future. Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may often be subject to conditions or approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close.

        An acquisition may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, the company's software is not easily adapted to work with ours or we have difficulty retaining the customers of the acquired business due to changes in management or otherwise. Acquisitions may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our business. Moreover, the anticipated benefits of any acquisition, investment or business relationship may not be realized or we may be exposed to unknown risks or liabilities. For one or more of those transactions, we may:

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issue additional equity securities that would dilute our stockholders;

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use cash that we may otherwise need in the future to operate our business;

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incur debt on terms unfavorable to us or that we are unable to repay;

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incur large charges or substantial liabilities;

•

encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and

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become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.

        Any of these outcomes could harm our business and operating results.

The loss of key personnel or an inability to attract and retain highly skilled personnel may impair our ability to grow our business.

        We are highly dependent upon the continued service and performance of our senior management team and other key personnel. These key employees may terminate employment with us at any time with no advance notice. The replacement of these employees likely would involve significant time and costs, and the loss of these employees may significantly delay or prevent the achievement of our business objectives.

        We face intense competition for qualified individuals from numerous technology and software companies. If we fail to attract and retain suitably qualified individuals, including software engineers and sales personnel, our ability to implement our business plan and develop and maintain our solutions could be adversely affected. As a result, our ability to compete would decrease, our operating results would suffer and our revenue would decrease.

Unanticipated changes in our effective tax rate or challenges by tax authorities could harm our future results.

        We are subject to income taxes in the United States and various foreign jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of our pre-tax earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses as a result of acquisitions,

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the valuation of deferred tax assets and liabilities, changes in federal, state or international tax laws and accounting principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents. Increases in our effective tax rate would reduce our profitability or in some cases increase our losses.

        In addition, we may be subject to income tax audits by many tax jurisdictions throughout the world, many of which have not established clear guidance on the tax treatment of cloud-based companies. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material impact on the results of operations for that period.

Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.

        We conduct integrated operations world-wide through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between our subsidiaries and between our subsidiaries and us. If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally require that transfer prices be the same as those between unrelated companies dealing at arms' length and that contemporaneous documentation is maintained to support the transfer prices. While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arms' length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability to us. Such reallocations may subject us to interest and penalties that would increase our consolidated tax liability and could adversely affect our financial condition, results of operations and cash flows.

If we fail to develop and maintain relationships with third parties, our business may be harmed.

        Our business depends in part on the development and maintenance of technology integration, joint sales and reseller relationships. Maintaining relationships with third parties requires significant time and resources, as does integrating third-party content and technology. Further, third parties may not perform as expected under any relationships that we may enter into, and we may have disagreements or disputes with third parties that could negatively affect our brand and reputation. If we are unsuccessful in establishing or maintaining relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results could suffer.

We use cloud-based services for critical business processes such as financial reporting and human resources, and our inability to access these systems or their inability to function as intended or as we expect them to function could harm our business.

        We use cloud-based services for critical business processes, such as human-capital management and payroll processing, processing, approval and payment of employee expense reports, and as our primary financial reporting and enterprise resource application system. If our vendors experience service impairments or outages, some of which may be related to third parties with which they partner, it may inhibit our ability to adhere to certain commitments we have made, both internally and externally, related to the delivery of financial information, including our reporting obligations as a public company, and, therefore, harm our business.

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Risks Related to This Offering and Ownership of Our Common Stock

An active trading market for our common stock may not develop, and you may not be able to resell your shares of our common stock at or above our initial public offering price.

        Before this offering, there was no public trading market for our common stock. If a market for our common stock does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at an attractive price or at all. The initial public offering price of our common stock will be determined through negotiations between us and the underwriters. This initial public offering price may not be indicative of the market price of our common stock after the offering. In the absence of an active trading market for our common stock, investors may not be able to sell their common stock at or above the initial public offering price or at the time that they would like to sell. We cannot predict the prices at which our common stock will trade. It is possible that in one or more future periods our results of operations may be below the expectations of public market analysts and investors and, as a result of these and other factors, the price of our common stock may fall.

The market price of our common stock may be volatile, which could result in substantial losses for investors purchasing shares in this offering.

        The market price of our common stock could be subject to significant fluctuations after this offering, and it may decline below the initial public offering price. Some of the factors that may cause the market price of our common stock to fluctuate include:

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actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts;

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price and volume fluctuations in the overall stock market from time to time;

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significant volatility in the market price and trading volume of comparable companies;

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changes in the market perception of Agile software development generally or in the effectiveness of our solutions in particular;

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announcements of technological innovations, new products, strategic alliances or significant agreements by us or by our competitors;

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litigation involving us;

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investors' general perception of us;

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changes in general economic, industry and market conditions and trends; and

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recruitment or departure of key personnel.

        In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources from our business.

We may need financing in the future, and any additional financing may result in restrictions on our operations or substantial dilution to our stockholders.

        We may need to raise funds in the future, for example, to develop new technologies, expand our business, respond to competitive pressures, acquire complementary businesses or respond to unanticipated situations. We may try to raise additional funds through public or private financings, strategic relationships or other arrangements. Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, our operating performance and investor interest. Additional funding may not be available to us on acceptable terms or at all. If adequate funds are not

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available, we may be required to reduce expenditures, including curtailing our growth strategies, reducing our product-development efforts or foregoing acquisitions. If we succeed in raising additional funds through the issuance of equity or convertible securities, it could result in substantial dilution to existing stockholders. If we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences, and privileges senior to those of the holders of our common stock. The terms of these securities, as well as any borrowings under our current loan and security agreement, could impose restrictions on our operations.

If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.

        The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not currently have and may never obtain research coverage by financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluation of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline. Furthermore, if our operating results fail to meet analysts' expectations our stock price would likely decline.

Sales of a substantial number of shares of our common stock in the public market by our existing stockholders following this offering could cause our stock price to fall.

        Sales of a substantial number of shares of our common stock in the public market could occur at any time after the expiration of the lock-up agreements described in the section titled "Underwriting." These sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After the closing of this offering, we will have            shares of common stock outstanding based on the 5,368,831 shares of common stock outstanding at October 31, 2012 and assuming the conversion of all outstanding shares of preferred stock into 35,839,731 shares of common stock. This includes the            shares that we are selling in this offering, which may be resold in the public market immediately. The remaining            shares, or            % of our outstanding shares after this offering, are currently, and will be following the closing of this offering, restricted as a result of securities laws or lock-up agreements but will be able to be sold, subject to any applicable volume limitations under federal securities laws with respect to affiliate sales, in the near future.

        In addition, as of October 31, 2012, there were an additional            shares reserved for future issuance under our stock-based compensation plans that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, lock-up agreements and Rules 144 and 701 under the Securities Act of 1933, as amended, or the Securities Act. Moreover, after this offering, holders of an aggregate of 35,839,731 shares of our common stock as of October 31, 2012, or certain of their transferees, and the holders of warrants to purchase 244,729 shares of our common stock, will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our stock-based compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements and the restrictions imposed on our affiliates under Rule 144 under the Securities Act.

        Additionally, Deutsche Bank Securities Inc. and Piper Jaffray & Co., on behalf of the underwriters, may with our consent, at any time with or without notice, release all or any portion of the shares

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subject to the lock-up agreements, which would result in more shares being available for sale in the public market at earlier dates. Sales of common stock by existing stockholders in the public market, the availability of these shares for sale, our issuance of securities or the perception that any of these events might occur could materially and adversely affect the market price of our common stock. In addition, the sale of these securities could impair our ability to raise capital through the sale of additional stock.

Purchasers in this offering will incur immediate and substantial dilution in the book value of their investment as a result of this offering.

        If you purchase common stock in this offering, you will incur immediate and substantial dilution of $            per share, representing the difference between the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and our pro forma as adjusted net tangible book value per share after giving effect to this offering and the conversion of all outstanding shares of our preferred stock immediately prior to the closing of this offering. Moreover, we issued warrants and options in the past that allow their holders to acquire common stock at prices significantly below the assumed initial public offering price of $            per share. As of October 31, 2012, there were 465,129 shares subject to outstanding warrants with a weighted-average exercise price of $0.98 per share and 4,551,224 shares subject to outstanding options with a weighted-average exercise price of $1.43 per share. To the extent that these outstanding warrants or options are ultimately exercised, you will experience further dilution.

Our existing directors, executive officers and principal stockholders will continue to have substantial control over us after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control.

        After this offering, it is anticipated that, based on share ownership as of October 31, 2012, including shares issuable upon the exercise of outstanding options and warrants exercisable within 60 days of October 31, 2012, our directors, executive officers, principal stockholders and their affiliates will beneficially own or control, directly or indirectly, in the aggregate, approximately            % of our outstanding common stock, assuming no exercise of the underwriters' option to purchase additional shares of our common stock in this offering. As a result, these stockholders, if they act together, could have significant influence over the outcome of matters submitted to our stockholders for approval, including the election or removal of directors, any amendments to our certificate of incorporation or bylaws and any merger, consolidation or sale of all or substantially all of our assets, and over the management and affairs of our company. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company or discouraging others from making tender offers for our shares, and might affect the market price of our common stock.

Because we do not expect to pay any dividends on our common stock for the foreseeable future, investors in this offering may never receive a return on their investment.

        We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition, our ability to pay cash dividends is currently limited by the terms of our existing loan and security agreement, which prohibits our payment of dividends on our capital stock without prior consent, and any future credit facility may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment.

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Our management will have broad discretion over the use of the proceeds we receive from this offering and might not apply the proceeds in ways that increase the value of your investment.

        Our management will have broad discretion to use our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply our net proceeds of this offering in ways that increase the value of your investment. We expect to use the net proceeds to us from this offering for working capital and other general corporate purposes, including financing our growth, which may, for example, include an increase in the pace of our international expansion or the expansion of our current business through acquisitions of or investments in complementary companies, products or technologies. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

Anti-takeover provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or changes in our Board of Directors or management and, therefore, depress the trading price of our common stock.

        Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that may depress the market price of our common stock by acting to discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove members of our Board of Directors or our management. Our corporate governance documents include provisions:

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establishing a classified board of directors with staggered three-year terms so that not all members of our Board of Directors are elected at one time;

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providing that directors may be removed by stockholders only for cause;

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limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

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requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board of Directors;

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authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; and

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limiting the liability of, and providing indemnification to, our directors and officers.

        As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock from engaging in certain business combinations with us. Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

        The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus, including the sections titled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and "Shares Eligible for Future Sale," contains forward-looking statements. In some cases you can identify these statements by forward-looking words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "will," "would" or the negative or plural of these words or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

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our financial performance, including our revenue, costs, expenditures, growth rates, operating expenses and ability to generate positive cash flow to attain and sustain profitability;

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the growth of demand for Agile software development;

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expanding our relationships with our existing customers;

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our ability to attract and retain customers;

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our ability to adapt to changing market conditions and competition;

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our ability to successfully enter new markets and manage our international expansion;

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our ability to effectively manage our growth;

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economic and financial conditions;

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anticipated technology trends, such as the use of cloud-based software solutions;

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the reliability of our third-party data centers;

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our ability to adapt to technological change and continue to innovate;

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our ability to integrate our solutions with other software applications;

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our ability to maintain, protect and enhance our brand and intellectual property;

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costs associated with defending intellectual property infringement and other claims;

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our ability to attract and retain qualified employees and key personnel;

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maintaining and expanding our relationships with third parties; and

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other factors discussed in this prospectus in the sections titled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business."

        These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled "Risk Factors." Moreover, we operate in a very competitive and rapidly-changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

        You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

30

MARKET, INDUSTRY AND OTHER DATA

        Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, including independent data, research opinions and viewpoints published by Forrester Research, Inc., or Forrester, Gartner, Inc., or Gartner, International Data Corporation, or IDC, and The Standish Group International, Incorporated, or the Standish Group, on assumptions that we have made that are based on those and other similar sources and on our knowledge of the markets for our solutions. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

        The Gartner Report and Forrester Reports described herein represent data, research opinions or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. and Forrester Research, Inc., respectively, and are not representations of fact. The Gartner Report and Forrester Reports speak as of their respective original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner Report and Forrester Reports are subject to change without notice.

        The sources of the industry and market data contained in this prospectus are provided below:

(1)

Forrester, The Forrester Wave^TM: Application Life-Cycle Management, Q4 2012, Tom Grant, Ph.D., October 2012.

(2)

Forrester, The Forrester Wave^TM: Agile Development Management Tools, Q2 2010, Dave West and Jeffrey S. Hammond, May 2010.

(3)

Gartner, Market Share: All Software Markets, Worldwide, 2011, Colleen Graham, et al, March 2012.

(4)

IDC, Worldwide Software as a Service 2011-2015 Forecast and 2010 Vendor Shares, Robert P. Mahowald, August 2011.

(5)

IDC, Worldwide Software Configuration Management 2012-2016 Forecast and 2011 Vendor Shares: Excellent Combined Growth as Multimodal Complexity Demands Governance, Melinda-Carol Ballou, June 2012.

(6)

IDC, Worldwide Automated Software Quality 2012-2016 Forecast: Multimodal Development with Mobile, Social, and Cloud Drives ASQ Growth, Melinda-Carol Ballou, June 2012.

(7)

IDC, Worldwide IT Project and Portfolio Management 2011-2015 Forecast and 2010 Vendor Shares: Leveraging Portfolio Management for Business Agility in the "New Normal," Melinda-Carol Ballou, August 2011.

(8)

IDC, Market Analysis Perspective: Application Lifecycle & Project Portfolio Management: Driving Quality, Change & Portfolio Strategies to Address Complexity, Melinda Ballou, December 2011.

(9)

The Standish Group, The CHAOS Manifesto: The Laws of CHAOS and the CHAOS 100 Best PM Practices, 2011.

        The content of the foregoing sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein.

31

USE OF PROCEEDS

        We estimate that the net proceeds to us from the sale of our common stock in this offering will be approximately $             million, based on an assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, we estimate that our net proceeds would be approximately $            million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

        Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us of this offering by approximately $            million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. Similarly, each increase (decrease) of one million shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds that we receive from this offering by approximately $            million, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions.

        The principal purposes of this offering are to increase our financial flexibility, improve our visibility in the marketplace and create a public market for our common stock. We have not yet determined with any degree of certainty the manner in which we will allocate the net proceeds of this offering. We intend to use the net proceeds from this offering for working capital and other general corporate purposes, including investing in our data center infrastructure, expanding our sales force and increasing our international presence. In addition, we believe that opportunities may exist from time to time to expand our current business through acquisitions of or investments in complementary companies, products or technologies. While we have no current agreements, commitments or understandings for any specific material acquisitions at this time, we may use a portion of the net proceeds for these purposes.

        We will have broad discretion over the uses of the net proceeds from this offering. Pending the use of the proceeds from this offering as described above, we plan to invest the net proceeds in short-term, investment-grade interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper or obligations issued or guaranteed by the U.S. government.

DIVIDEND POLICY

        We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare dividends will be subject to the discretion of our Board of Directors and will be dependent on a number of factors, including our operating results, capital requirements and overall financial condition and any other factors deemed relevant by our Board of Directors. In addition, the terms of our loan and security agreement with Square 1 Bank limit our ability to pay dividends.

32

CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of October 31, 2012, as follows:

•

on an actual basis;

•

on a pro forma basis, giving effect to (i) the conversion of all outstanding shares of our preferred stock into 35,839,731 shares of common stock immediately prior to the closing of this offering, (ii) the reclassification of our preferred stock warrant liability to additional paid-in capital immediately prior to the closing of this offering and (iii) the filing of our amended and restated certificate of incorporation; and

•

on a pro forma as adjusted basis to further reflect the sale by us of            shares of common stock in this offering based on an assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

        You should read the information in this table together with our consolidated financial statements and related notes and the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus.

	As of October 31, 2012
	Actual		Pro Forma		Pro Forma As Adjusted(1)
	(unaudited) (in thousands, except share and per share data)
Cash and cash equivalents	$	19,604	$	19,604	$
Preferred stock warrant liability	$	1,643	$	—	$	—
Redeemable convertible preferred stock:
Series E convertible preferred stock, par value $0.0001 per share; 4,000,000 shares authorized, 3,883,496 issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		19,882		—		—
Series D convertible preferred stock, par value $0.0001 per share; 5,619,851 shares authorized, 5,567,164 issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		15,803		—		—
Series A-1 convertible preferred stock, par value $0.0001 per share; 8,524,941 shares authorized, 8,421,388 issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		8,395		—		—
Series B convertible preferred stock, par value $0.0001 per share; 7,205,155 shares authorized, 7,091,479 issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		7,957		—		—
Series C convertible preferred stock, par value $0.0001 per share; 11,328,227 shares authorized, 10,876,204 issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		16,373		—		—
Total redeemable convertible preferred stock		68,410		—		—

33

	As of October 31, 2012
	Actual			Pro Forma			Pro Forma As Adjusted(1)
	(unaudited) (in thousands, except share and per share data)
Stockholders' equity (deficit):
Preferred stock, par value $0.0001 per share; no shares authorized, issued and outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted		—			—			—
Common stock, par value $0.0001 per share; 50,000,000 shares authorized, 5,368,831 shares issued and outstanding, actual; 200,000,000 shares authorized, 41,208,562 shares issued and outstanding, pro forma; and 200,000,000 shares authorized,                        shares issued and outstanding, pro forma as adjusted		1			4
Accumulated other comprehensive income		6			6			6
Additional paid-in capital		1,917			71,967
Accumulated deficit		(71,481	)		(71,481	)		(71,481	)
Total stockholders' equity (deficit)		(69,557	)		496
Total capitalization	$	496		$	496		$

(1)

Each $1.00 increase (decrease) in the assumed initial public offering price of $                    per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders' equity (deficit) and total capitalization by approximately $       million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after underwriting discounts and commissions. Similarly, each increase (decrease) of one million shares in the number of shares offered by us would increase (decrease) cash and cash equivalents, additional paid-in capital, total stockholders' equity (deficit) and total capitalization by approximately $       million, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

        The number of shares of common stock to be outstanding after this offering is based on 41,208,562 shares of our common stock (including preferred stock on an as-converted basis) outstanding as of October 31, 2012, and excludes:

•

4,551,224 shares of common stock issuable upon exercise of stock options outstanding as of October 31, 2012, at a weighted-average exercise price of $1.43 per share;

•

121,002 shares of common stock issuable upon exercise of warrants to purchase shares of common stock outstanding as of October 31, 2012, at a weighted-average exercise price of $0.14 per share, which warrants will automatically "net exercise" immediately prior to the closing of this offering if not exercised prior thereto;

•

344,127 shares of common stock issuable upon exercise of warrants to purchase shares of our preferred stock outstanding as of October 31, 2012, at a weighted-average exercise price of $1.28 per share;

•

296,226 additional shares of common stock reserved as of October 31, 2012 for future issuance under our Amended and Restated 2002 Stock Option Plan;

34

•

                    additional shares of common stock reserved for future issuance under our 2013 Equity Incentive Plan, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement related to this offering; and

•

                    shares of common stock reserved for future issuance under our 2013 Employee Stock Purchase Plan, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement related to this offering.

35

DILUTION

        If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after the closing of this offering.

        The pro forma net tangible book value of our common stock as of October 31, 2012 was $0.5 million, or $0.01 per share, based on 41,208,562 shares of common stock outstanding. Pro forma net tangible book value per share represents our total tangible assets (total assets less intangible assets) less our total liabilities, divided by the number of shares of outstanding common stock, after giving effect to (i) the conversion of all outstanding shares of our preferred stock into 35,839,731 shares of common stock immediately prior to the closing of this offering and (ii) the reclassification of our preferred stock warrant liability to additional paid-in capital immediately prior to the closing of this offering.

        After giving effect to the receipt of the net proceeds from our sale of            shares of common stock in this offering at an assumed initial public offering price of $            per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of October 31, 2012 would have been $             million, or $            per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $            per share to our existing stockholders and an immediate dilution of $            per share to investors purchasing common stock in this offering.

        The following table illustrates this dilution on a per share basis to new investors:

Assumed initial public offering price per share			$
Pro forma net tangible book value per share as of October 31, 2012	$	0.01
Increase in pro forma net tangible book value per share attributed to new investors purchasing shares from us in this offering
Pro forma as adjusted net tangible book value per share after giving effect to this offering
Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering			$

        Each $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) the pro forma net tangible book value, as adjusted to give effect to this offering, by $      per share and the dilution to new investors by $      per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions. Similarly, each increase (decrease) of one million shares in the number of shares of common stock offered by us would increase (decrease) the pro forma net tangible book value, as adjusted to give effect to this offering, by approximately $      per share and the dilution to new investors by $      per share, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions.

        If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share of our common stock would be $       per share, and the dilution in pro forma as adjusted net tangible book value per share to investors in this offering would be $      per share of common stock.

36

        The following table summarizes as of October 31, 2012, on the pro forma as adjusted basis described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by our existing stockholders and (ii) to be paid by new investors purchasing our common stock in this offering at an assumed initial public offering price of $            per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

	Shares Purchased				Total Consideration
									Average Price Per Share
	Number	Percent			Amount	Percent
Existing stockholders				%	$			%	$
New investors
Total			100	%			100	%

        The total number of shares of our common stock reflected in the discussion and tables above is based on 41,208,562 shares of our common stock (including preferred stock on an as converted basis) outstanding, as of October 31, 2012, and excludes:

•

4,551,224 shares of common stock issuable upon exercise of stock options outstanding as of October 31, 2012, at a weighted-average exercise price of $1.43 per share;

•

121,002 shares of common stock issuable upon exercise of warrants to purchase shares of common stock outstanding as of October 31, 2012, at a weighted-average exercise price of $0.14 per share, which warrants will automatically "net exercise" immediately prior to the closing of this offering if not exercised prior thereto;

•

344,127 shares of common stock issuable upon exercise of warrants to purchase shares of our preferred stock outstanding as of October 31, 2012, at a weighted-average exercise price of $1.28 per share;

•

296,226 additional shares of common stock reserved as of October 31, 2012 for future issuance under our Amended and Restated 2002 Stock Option Plan;

•

                    additional shares of common stock reserved for future issuance under our 2013 Equity Incentive Plan, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement related to this offering; and

•

                    shares of common stock reserved for future issuance under our 2013 Employee Stock Purchase Plan, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan, which will become effective upon the execution of the underwriting agreement related to this offering.

        To the extent that any outstanding stock options or warrants are exercised, new options are issued under our stock-based compensation plans or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. If all outstanding options under our Amended and Restated 2002 Stock Option Plan as of October 31, 2012 and all outstanding warrants as of October 31, 2012 were exercised for cash, then our existing stockholders, including the holders of these options and warrants, would own        % and our new investors would own        % of the total number of shares of our common stock outstanding upon the closing of this offering, respectively. In such event, the total consideration paid by our existing stockholders, including the holders of these options and warrants, would be $             million, or        %, the total consideration paid by our new investors would be $             million, or        %, the average price per share paid by our existing stockholders would be $            and the average price per share paid by our new investors would be $            .

37

SELECTED CONSOLIDATED FINANCIAL DATA

        The following selected consolidated financial data should be read together with our consolidated financial statements and related notes and the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes. Our historical results are not necessarily indicative of our future results and our results for the nine months ended October 31, 2012 are not necessarily indicative of the results to be expected for the full fiscal year.

        The selected consolidated statements of operations data for the fiscal years ended January 31, 2010, 2011 and 2012 and the consolidated balance sheet data as of January 31, 2011 and 2012 are derived from our audited consolidated financial statements contained elsewhere in this prospectus. The consolidated balance sheet data as of January 31, 2010 is derived from our audited consolidated financial statements that are not included in this prospectus. The selected consolidated statements of operations data for the fiscal years ended January 31, 2008 and 2009 and the consolidated balance sheet data as of January 31, 2008 and 2009 are derived from our unaudited consolidated financial statements that are not included in this prospectus. The selected consolidated statements of operations data for the nine months ended October 31, 2011 and 2012 and the consolidated balance sheet data as of October 31, 2012 are derived from our unaudited consolidated financial statements contained elsewhere in this prospectus. We have prepared the unaudited financial information on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, we consider necessary for a fair statement of the financial information set forth in those statements.

38

	Fiscal Year Ended January 31,															Nine Months Ended October 31,
	2008			2009			2010			2011			2012			2011			2012
	(unaudited)															(unaudited)
	(dollars in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue:
Subscription and support	$	3,859		$	7,811		$	12,897		$	19,902		$	31,124		$	22,214		$	31,406
Perpetual license		—			111			1,334			4,260			3,546			2,763			4,270
Total product revenue		3,859			7,922			14,231			24,162			34,670			24,977			35,676
Professional services		2,126			3,152			4,142			5,548			6,655			5,092			5,677
Total revenue		5,985			11,074			18,373			29,710			41,325			30,069			41,353
Cost of revenue:
Product(1)		399			1,295			1,990			3,033			4,096			3,052			3,816
Professional services(1)		1,675			2,506			3,373			4,846			5,679			4,291			5,296
Total cost of revenue		2,074			3,801			5,363			7,879			9,775			7,343			9,112
Gross profit		3,911			7,273			13,010			21,831			31,550			22,726			32,241
Operating expenses:
Sales and marketing(1)		5,919			11,061			13,407			18,526			23,552			17,061			20,769
Research and development(1)		2,814			4,466			5,230			7,979			11,074			8,173			10,697
General and administrative(1)		2,277			4,012			3,875			5,074			8,170			5,897			7,592
Sublease termination income(2)		—			—			—			—			—			—			(839	)
Total operating expenses		11,010			19,539			22,512			31,579			42,796			31,131			38,219
Loss from operations		(7,099	)		(12,266	)		(9,502	)		(9,748	)		(11,246	)		(8,405	)		(5,978	)
Interest and other income (expense), net		(82	)		(213	)		(244	)		(191	)		(346	)		(353	)		(754	)
Net loss		(7,181	)		(12,479	)		(9,746	)		(9,939	)		(11,592	)		(8,758	)		(6,732	)
Preferred stock accretion		—			—			(67	)		(81	)		(22	)		(22	)		—
Preferred stock deemed dividend(3)		—			—			—			—			(762	)		(762	)		—
Net loss attributable to common stockholders	$	(7,181	)	$	(12,479	)	$	(9,813	)	$	(10,020	)	$	(12,376	)	$	(9,542	)	$	(6,732	)
Net loss per common share, basic and diluted(4)	$	(4.54	)	$	(5.17	)	$	(3.18	)	$	(2.78	)	$	(2.65	)	$	(2.07	)	$	(1.31	)
Weighted-average common shares outstanding, basic and diluted(4)		1,580,283			2,411,500			3,085,962			3,610,442			4,678,414			4,600,963			5,152,788
Pro forma net loss per share (unaudited)(4)													$	(0.29	)				$	(0.15	)
Pro forma weighted-average common shares used to compute pro forma net loss per share (unaudited)(4)														39,481,931						40,992,519
Key Metrics (unaudited):
Total paid seats(5)		11,777			28,841			49,883			79,375			116,899			107,689			154,982
Renewal rate(6)		137	%		151	%		129	%		132	%		129	%		126	%		123	%

39

(1)

Includes stock-based compensation as follows:

	Fiscal Year Ended January 31,										Nine Months Ended October 31,
	2008		2009		2010		2011		2012		2011		2012
	(unaudited)										(unaudited)
	(in thousands)
Cost of product revenue	$	3	$	2	$	5	$	6	$	10	$	6	$	11
Cost of professional services revenue		—		6		6		9		17		12		16
Sales and marketing		7		11		46		57		124		83		142
Research and development		10		21		48		56		93		63		127
General and administrative		10		22		66		65		324		199		394
	$	30	$	62	$	171	$	193	$	568	$	363	$	690

(2)

In April 2012, the sublease for our corporate headquarters was terminated as a result of the sale of the building by the building's owner. The transaction was deemed a termination of the original lease and we derecognized the remaining deferred rent expense. See Note 14 of our consolidated financial statements for additional information.

(3)

In August 2011, we repurchased 377,812 shares of our preferred stock. The difference between the carrying value of the shares of preferred stock and their estimated fair value was deemed to be a dividend. See Note 8 of our consolidated financial statements for additional information.

(4)

See Note 12 of our consolidated financial statements for a discussion and reconciliation of historical and pro forma net loss attributable to common stockholders and weighted-average common shares outstanding for historical and pro forma basic and diluted net loss per share calculations.

(5)

Represents the number of total paid seats at period end. We define a paid seat as a seat with a subscription or support contract as of the measurement date. In the case of a contract that allows a customer to provision an unlimited number of seats, total paid seats includes an estimate of the total number of seats to be provisioned during the term of the contract. Total paid seats as of October 31, 2012 includes 7,700 in seat upgrades pursuant to such contracts. For more information, see the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics."

(6)

Represents our renewal rate for the trailing twelve-month period ended as of the specified period end. We calculate our renewal rate by comparing the number of paid seats of all of our existing customers at the beginning of a twelve-month period to the number of paid seats for those same customers at the end of such period, taking into account nonrenewals, upgrades and downgrades. We exclude seats sold to new customers. For more information, see the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics."

	As of January 31,
																As of October 31, 2012
	2008			2009			2010			2011			2012
	(unaudited)															(unaudited)
	(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	283		$	3,017		$	15,906		$	4,566		$	19,452		$	19,604
Working capital, excluding current deferred revenue		1,735			6,865			18,331			13,360			28,052			25,705
Total assets		3,961			9,641			24,043			20,458			35,472			35,772
Deferred revenue, current and long-term		4,377			7,685			12,423			18,338			25,109			29,883
Notes payable and capital lease obligations, current and long-term		2,624			264			2,973			132			31			2
Preferred stock warrant liability		—			396			436			591			925			1,643
Convertible preferred stock		16,265			33,062			49,051			49,131			68,410			68,410
Total stockholders' deficit		(20,550	)		(33,121	)		(42,662	)		(52,133	)		(63,671	)		(69,557	)

40

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this prospectus. This discussion contains information with respect to our plans and strategy as well as forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this prospectus. The last day of our fiscal year is January 31. Our fiscal quarters end on April 30, July 31, October 31 and January 31. Throughout this management's discussion and analysis of financial condition and results of operations we may from time to time refer to fiscal years and the reference relates to the fiscal year end; for example, fiscal 2012 would represent the fiscal year that ended on January 31, 2012.

Overview

        Rally Software is a leading global provider of cloud-based solutions for managing Agile software development. Our platform transforms the way organizations manage the software development lifecycle by enabling close alignment of software development and strategic business objectives, facilitating collaboration, increasing transparency, and automating manual processes. Organizations use our solutions to accelerate the pace of innovation, improve productivity and more effectively adapt to rapidly-changing customer needs and competitive dynamics. Our enterprise-class platform is extensible, cost-effective and designed to be easy to use. Agile is a software development methodology characterized by short, iterative and highly-adaptable development cycles. Since its introduction in 2001, organizations have increasingly adopted Agile. The Standish Group estimates that Agile techniques were used for 29% of new software development projects in 2011.

        We were founded in 2001 and until 2004 our activities were primarily focused on research and development. In late 2004, we released our first commercial, cloud-based solution. Initially, we focused on the U.S. market, targeted small- and medium-sized businesses and sold our solutions primarily to software companies. Over time we have successfully grown our business by diversifying our customer base across numerous industry verticals and geographies and shifting our sales focus to enterprises. Concurrent with this change in customer composition, we began providing deployment flexibility with an on-premise option and four editions of our solutions, a free Community Edition, an eXpress Edition, an Enterprise Edition and an Unlimited Edition. Since 2010, we have made significant investments in our sales force and broadened our solutions and international presence in response to the growing market opportunity for Agile management solutions. In December 2011, we introduced our Rally Portfolio Manager solution, which helped us to attract greater interest and drive adoption of our Unlimited Edition. As of October 31, 2012, we had over 1,000 customers with users around the world.

        Our operating results in a given period can fluctuate based on the mix of subscription and support, perpetual license and professional services revenue. In fiscal 2012, subscription and support revenue accounted for 75% of total revenue. Our subscription contracts are typically sold on a per-seat basis with a one-year term, paid upfront and provide us with revenue visibility over a number of quarters. We typically negotiate the total number of seats a customer is entitled to provision as part of their subscription, but these seats may not be fully utilized over the term of the agreement. However, we have recently, and may in the future, enter into multi-year contracts in which the fees are paid upfront and the customer is entitled to an unlimited number of seats. These contracts may lead to significant fluctuations in cash flow from operations and will positively impact cash flow from operations in the period in which the cash is received. To a lesser extent, we sell perpetual licenses, which are also paid upfront and include support agreements, which are one year in duration and entitle the customer to support and upgrades. In fiscal 2012, perpetual license revenue accounted for 9% of total revenue. We

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also offer professional services, which include training on Agile software development methodologies and the use of our solutions. In fiscal 2012, professional services accounted for 16% of total revenue.

        We employ a land-and-expand go-to-market strategy, which is designed to encourage adoption of our solutions by helping establish Agile practices within an initial team, project or business unit. After demonstrating the value of our solutions to those first adopters, we work to expand the use of our solutions and sell additional subscriptions across the organization by targeting other development teams, departments and business units. We believe that our enterprise-level customers are underpenetrated and represent a significant growth opportunity for us to increase our seat count. Our growth has also been driven by selling to new enterprise customers, as Agile software development practices continue to be adopted. While part of our growth strategy is to promote adoption of Agile practices through the use of our free Community Edition, to date the conversion of customers of our free edition to one of our paid editions has not had a material impact on our revenue. We also continue to invest in our sales and marketing efforts worldwide. During fiscal 2012, revenue from international customers accounted for 14% of total revenue and no customer accounted for more than 5% of our total revenue. We sell our solutions primarily through a direct sales force, both domestically and internationally.

        As we grow our business, we continue to face many challenges and risks. Specifically, our growth is dependent on the continued adoption of Agile software development techniques and investment in our business, including expanding our data center infrastructure capacity and sales and engineering teams, as well as continuing to grow our international presence. We might encounter difficulties growing our international presence if we are unable to localize our solutions and successfully compete with regional companies. Over time, as competition increases we expect to face pricing pressure. In addition, we offer volume price discounts based on the number of seats purchased. We may also experience seat downgrades that could negatively impact our total seat count. Seat downgrades occur for several reasons, including dissatisfaction with our prices or features relative to competitive offerings, reductions in our customers' spending levels, unused seats, limited adoption by a customer of our solutions or Agile practices, or departure of Agile users. Our strategic initiatives will require expenditure of capital and the attention of management and we may be unsuccessful as we execute on our growth plan.

        We have achieved significant growth since inception. From fiscal 2011 to fiscal 2012, our subscription and support revenue grew from $19.9 million to $31.1 million, representing a 56% year-over-year growth rate. From fiscal 2011 to fiscal 2012, our total revenue grew from $29.7 million to $41.3 million, representing a 39% year-over-year growth rate. Our historical rates of revenue growth may not be sustainable. We expect to make significant expenditures to support and grow our business, including investing in our data center infrastructure, expanding our sales force and increasing our international presence. In addition, as a public company we will incur significant legal, accounting and other expenses that we did not incur as a private company. Furthermore, we may encounter unforeseen expenses, complications and other difficulties. We expect to incur losses for the foreseeable future and we may not be able to achieve or sustain profitability.

Key Metrics

        We regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections and make strategic decisions.

        Total paid seats.    We believe total paid seats are a key indicator of our market penetration, growth and future revenue. We define a paid seat as a seat with a subscription or support contract as of the measurement date. Our total paid seats were 49,883, 79,375 and 116,899 as of January 31, 2010, 2011 and 2012, respectively, and 154,982 as of October 31, 2012. In the case of a contract that allows a customer to provision an unlimited number of seats, total paid seats includes an estimate of the total number of seats to be provisioned during the term of the contract. Total paid seats as of October 31, 2012 includes a 6,000 seat upgrade pursuant to such a contract with an existing enterprise customer

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entered into in July 2012 as well as a 1,700 seat upgrade pursuant to a similar contract with a different enterprise customer entered into in September 2012.

        Renewal rate.    We believe our renewal rate is an important metric to measure the long-term value of customer agreements and our ability to upsell or expand in our existing customer base. We calculate our renewal rate by comparing the number of paid seats of all of our existing customers at the beginning of a twelve-month period to the number of paid seats for those same customers at the end of such period, taking into account nonrenewals, upgrades and downgrades. We exclude seats sold to new customers. For fiscal 2010, 2011 and 2012, the renewal rate was 129%, 132% and 129%, respectively. For the twelve months ended October 31, 2012, the renewal rate was 123%.

Components of Operating Results

Revenue

        Subscription and support revenue.    We derive our subscription revenue from fees paid to us by our customers for access to our cloud-based solutions. We recognize the revenue associated with subscription agreements ratably on a straight-line basis over the term of the agreement, provided all criteria required for revenue recognition have been met.

        Our support revenue consists of maintenance associated with our perpetual licenses and hosting fees paid to us by our customers. Typically, when purchasing a perpetual license, a customer also purchases maintenance for which we charge a fee, priced as a percentage of the perpetual license fee. Maintenance agreements include the right to support and unspecified product upgrades. We recognize the revenue associated with maintenance ratably, on a straight-line basis, over the term of the contract. In limited instances, at the customer's option, we may host the software purchased by a customer under a perpetual license on systems at our third-party data centers. For hosting, we charge a fee, priced as a percentage of the perpetual license fee, and we recognize the revenue associated with hosting ratably on a straight-line basis over the associated hosting period.

        Perpetual license revenue.    Perpetual license revenue reflects the revenue recognized from sales of perpetual licenses to new customers and additional licenses to existing customers. We generally recognize the license fee portion of the arrangement upfront, provided all revenue recognition criteria are satisfied.

        Professional services revenue.    Professional services revenue consists primarily of fees related to the instruction of customers in Agile software development methodologies and training on our solutions as well as reimbursable expenses. We generally recognize the revenue associated with these professional services on a time-and-materials basis as we deliver the services or provide the training to our customers.

Cost of Revenue

        Cost of product revenue.    Cost of product revenue consists primarily of personnel and related costs of our support and operations teams, including salaries, benefits, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as software license fees, hosting costs, Internet connectivity and depreciation expenses directly related to delivering our solutions. As we add data center capacity and support personnel in advance of anticipated growth, our cost of product revenue will increase and if such anticipated revenue growth does not occur, our product gross profit will be adversely affected. Our cost of product revenue is generally expensed as the costs are incurred.

        Cost of professional services revenue.    Cost of professional services revenue consists primarily of personnel and related costs, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, the costs of contracted third-party vendors, reimbursable expenses and allocated overhead. As most of our personnel are employed on a full-time basis, our cost of professional services

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is largely fixed in the short-term, while our professional services revenue may fluctuate, leading to fluctuations in professional services gross profit. Our cost of professional services revenue is generally expensed as costs are incurred.

Operating Expenses

        Our operating expenses are classified into three categories: sales and marketing, research and development and general and administrative. For each category, the largest expense component is personnel and related costs, which includes salaries, employee benefit costs, bonuses, commissions, stock-based compensation and payroll taxes. Operating expenses also include allocated overhead costs for facilities and depreciation of equipment, which are allocated to each department based on relative department headcount. Operating expenses are generally recognized as incurred.

        Sales and marketing.    Sales and marketing expenses primarily consist of personnel and related costs for our sales and marketing staff, including salaries, benefits, commissions, bonuses, payroll taxes, stock-based compensation and costs of promotional events, corporate communications, online marketing, product marketing and other brand-building activities, in addition to allocated overhead. We expense sales commissions when the initial customer contract is signed and upon any renewal as our obligation to pay a sales commission arises at these times. We expect that sales and marketing expenses will continue to increase in absolute dollars, partially as a result of our international expansion, and will continue to be the largest expense component of our operating expenses. However, we expect sales and marketing expenses to be relatively constant as a percentage of revenue in the near term.

        Research and development.    Research and development expenses primarily consist of personnel and related costs of our research and development staff, including salaries, benefits, bonuses, payroll taxes, stock-based compensation and costs of certain third-party contractors, as well as allocated overhead. Research and development costs related to the development of our software products are generally expensed as incurred as development costs that have qualified for capitalization are not significant. We have devoted our product development efforts primarily to enhancing the functionality and expanding the capabilities of our solutions. We expect that our research and development expenses will continue to increase in absolute dollars as we increase our research and development headcount to further strengthen and enhance our solutions.

        General and administrative.    General and administrative expenses primarily consist of personnel and related costs for our executive, administrative, finance, information technology, legal, accounting and human resource staffs, including salaries, benefits, bonuses, payroll taxes and stock-based compensation, professional fees, other corporate expenses and allocated overhead. We have recently incurred, and expect to continue to incur, additional expenses as we grow our operations and prepare to operate as a public company, including higher legal, corporate insurance, accounting and auditing expenses, and the additional costs of enhancing and maintaining our internal control environment through the adoption of new corporate policies. We also expect that general and administrative expenses will continue to increase in absolute dollars as we expand our operations, including internationally.

Other Income (Expense)

        Other income (expense) consists primarily of interest income on our cash balances, changes in the estimated fair value of our preferred stock warrants, which are recorded as interest expense because the warrants were issued in conjunction with debt facilities, interest expense on outstanding debt and foreign exchange gains (losses) that relate to expenses and transactions denominated in currencies other than our functional currency. Our functional currency is the U.S. dollar.

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Provision for Income Taxes

        Because we have generated net losses in all periods to date and recorded a full valuation allowance against our deferred tax assets, we have historically not recorded a provision for federal or state income taxes. Foreign income taxes have not been material. Realization of any of our deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Utilization of our net operating losses may be subject to annual limitations due to the ownership change rules under the Internal Revenue Code of 1986, as amended, and similar state provisions. We completed an analysis covering the period through fiscal 2012 to determine whether an ownership change had occurred since our inception. The analysis indicated that although an ownership change had occurred in 2003, the net operating losses and research and development credits remained available to offset future taxable income, if any. However, in the event we have subsequent changes in ownership, including as a result of this offering, the availability of net operating losses and research and development credit carryovers could be limited.

Results of Operations

        The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods, and the results for the first nine months of fiscal 2013 are not necessarily indicative of results to be expected for the full year or for any other period.

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	Fiscal Year Ended January 31,									Nine Months Ended October 31,
	2010			2011			2012			2011			2012
										(unaudited)
	(in thousands)
Consolidated Statements of Operations Data:
Revenue:
Subscription and support	$	12,897		$	19,902		$	31,124		$	22,214		$	31,406
Perpetual license		1,334			4,260			3,546			2,763			4,270
Total product revenue		14,231			24,162			34,670			24,977			35,676
Professional services		4,142			5,548			6,655			5,092			5,677
Total revenue		18,373			29,710			41,325			30,069			41,353
Cost of revenue:
Product		1,990			3,033			4,096			3,052			3,816
Professional services		3,373			4,846			5,679			4,291			5,296
Total cost of revenue		5,363			7,879			9,775			7,343			9,112
Gross profit		13,010			21,831			31,550			22,726			32,241
Operating expenses:
Sales and marketing		13,407			18,526			23,552			17,061			20,769
Research and development		5,230			7,979			11,074			8,173			10,697
General and administrative		3,875			5,074			8,170			5,897			7,592
Sublease termination income		—			—			—			—			(839	)
Total operating expenses		22,512			31,579			42,796			31,131			38,219
Loss from operations		(9,502	)		(9,748	)		(11,246	)		(8,405	)		(5,978	)
Other (expense) income:
Interest and other income		9			72			53			46			43
Interest expense		(233	)		(251	)		(349	)		(329	)		(722	)
Loss on foreign currency transactions and other gain (loss)		(20	)		(12	)		(50	)		(70	)		(75	)
Net loss	$	(9,746	)	$	(9,939	)	$	(11,592	)	$	(8,758	)	$	(6,732	)

	Fiscal Year Ended January 31,									Nine Months Ended October 31,
	2010			2011			2012			2011			2012
										(unaudited)
	(as a percentage of total revenue)
Consolidated Statements of Operations Data:
Revenue:
Subscription and support		70	%		67	%		75	%		74	%		76	%
Perpetual license		7			14			9			9			10
Total product revenue		77			81			84			83			86
Professional services		23			19			16			17			14
Total revenue		100			100			100			100			100
Cost of revenue:
Product		11			10			10			10			9
Professional services		18			16			14			14			13
Total cost of revenue		29			26			24			24			22
Gross profit		71			74			76			76			78
Operating expenses:
Sales and marketing		73			63			57			57			50
Research and development		29			27			26			27			26
General and administrative		21			17			20			20			18
Sublease termination income		—			—			—			—			(2	)
Total operating expenses		123			107			103			104			92
Loss from operations		(52	)		(33	)		(27	)		(28	)%		(14	)%
Other (expense) income:
Interest and other income		—			—			—			—			—
Interest expense		(1	)		(1	)		(1	)		(1	)		(2	)
Loss on foreign currency transactions and other gain (loss)		—			—			—			—			—
Net loss		(53	)%		(34	)%		(28	)%		(29	)%		(16	)%

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Comparison of Nine Months Ended October 31, 2011 and October 31, 2012

Revenue

	Nine Months Ended October 31,
							% Change
	2011			2012
	(dollars in thousands)
Revenue:
Subscription and support	$	22,214		$	31,406			41	%
Perpetual license		2,763			4,270			55	%
Total product revenue		24,977			35,676			43	%
Professional services		5,092			5,677			11	%
Total revenue	$	30,069		$	41,353			38	%
Percentage of revenue:
Subscription and support		74	%		76	%
Perpetual license		9			10
Total product revenue		83			86
Professional services		17			14
Total		100	%		100	%

        Total revenue increased $11.3 million from the nine months ended October 31, 2011 to the nine months ended October 31, 2012, primarily due to the increase in subscription and support revenue of $9.2 million. Of the total increase in subscription and support revenue, approximately $2.6 million, or 28%, represented revenue from new customers acquired after October 31, 2011, and approximately $6.6 million, or 72%, represented revenue from existing customers at or prior to October 31, 2011. The increase in revenue from existing customers was due primarily to sales of additional seats, which we believe is attributable to increased adoption of Agile practices by our customers. Although the amount of perpetual license revenue increased in terms of absolute dollars, as a percentage of total revenue it was flat. Professional services revenue increased by $0.6 million from the nine months ended October 31, 2011, primarily due to higher demand for training services, and decreased from that period as a percentage of total revenue.

Cost of Revenue

	Nine Months Ended October 31,
							% Change
	2011			2012
	(dollars in thousands)
Cost of revenue:
Product	$	3,052		$	3,816			25	%
Professional services		4,291			5,296			23	%
Total cost of revenue	$	7,343		$	9,112			24	%
Gross profit:
Product		88	%		89	%
Professional services		16	%		7	%
Total gross profit		76	%		78	%

        Total cost of revenue increased $1.8 million from the nine months ended October 31, 2011 to the nine months ended October 31, 2012. The increase was primarily due to an increase of $0.9 million in personnel and related expenses, a $0.3 million increase in third-party consulting expenses and a $0.1 million increase in travel-related expenses.

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Operating Expenses

Sales and Marketing

	Nine Months Ended October 31,
							% Change
	2011			2012
	(dollars in thousands)
Sales and marketing	$	17,061		$	20,769			22	%
Percentage of total revenue		57	%		50	%

        Sales and marketing expenses increased $3.7 million from the nine months ended October 31, 2011 to the nine months ended October 31, 2012 primarily due to a $2.8 million increase in personnel and related expenses and a $0.4 million increase in travel-related expenses. As of October 31, 2011, our international presence was limited to our United Kingdom office and we had incurred a relatively small amount of expenses associated with an office in Australia. By October 31, 2012, we had opened an additional sales office in the Netherlands, established sales personnel in Canada and incurred expenses with respect to our Australian office for an entire nine-month period.

Research and Development

	Nine Months Ended October 31,
							% Change
	2011			2012
	(dollars in thousands)
Research and development	$	8,173		$	10,697			31	%
Percentage of total revenue		27	%		26	%

        Research and development expenses increased $2.5 million from the nine months ended October 31, 2011 to the nine months ended October 31, 2012, primarily due to a $2.0 million increase in personnel and related expenses as we hired additional software engineers to add new features and functionality to our solutions and a $0.3 million increase in allocated rent expense.

General and Administrative

	Nine Months Ended October 31,
							% Change
	2011			2012
	(dollars in thousands)
General and administrative	$	5,897		$	7,592			29	%
Percentage of total revenue		20	%		18	%

        General and administrative expenses increased $1.7 million from the nine months ended October 31, 2011 to the nine months ended October 31, 2012 primarily due to a $1.1 million increase in personnel and related expenses as we hired employees to support our growth and our anticipated transition from a private company to a public company and a $0.2 million increase in allocated rent expense.

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Other (Expense) Income

	Nine Months Ended October 31,
	2011			2012
	(dollars in thousands)
Other (expense) income:
Interest and other income	$	46		$	43
Interest expense		(329	)		(722	)
Loss on foreign currency transactions and other gain (loss)		(70	)		(75	)
Total	$	(353	)	$	(754	)

        Other (expense) income increased by $0.4 million primarily due to additional interest expense associated with our preferred stock warrants.

Comparison of Fiscal Years Ended January 31, 2010, 2011 and 2012

Revenue

	Fiscal Year Ended January 31,
										% Change from 2010 to 2011			% Change from 2011 to 2012
	2010			2011			2012
	(dollars in thousands)
Revenue:
Subscription and support	$	12,897		$	19,902		$	31,124			54	%		56	%
Perpetual license		1,334			4,260			3,546			219	%		(17	)%
Total product revenue		14,231			24,162			34,670			70	%		43	%
Professional services		4,142			5,548			6,655			34	%		20	%
Total revenue	$	18,373		$	29,710		$	41,325			62	%		39	%
Percentage of revenue:
Subscription and support		70	%		67	%		75	%
Perpetual license		7			14			9
Total product revenue		77			81			84
Professional services		23			19			16
Total		100	%		100	%		100	%

        Subscription and support revenue increased by $11.2 million from fiscal 2011 to fiscal 2012. Of the total increase in subscription and support revenue, approximately $2.5 million, or 22%, represented revenue from new customers acquired after January 31, 2011, and approximately $8.7 million, or 78%, represented revenue from existing customers at or prior to January 31, 2011. The increase in revenue from existing customers was due primarily to sales of additional seats, which we believe is attributable to increased adoption of Agile practices by our customers.

        Subscription and support revenue increased $7.0 million from fiscal 2010 to fiscal 2011. Of the total increase in subscription and support revenue, approximately $1.9 million, or 27%, represented revenue from new customers acquired after January 31, 2010, and approximately $5.1 million, or 73%, represented revenue from existing customers at or prior to January 31, 2010. The increase in revenue from existing customers was due primarily to sales of additional seats, which we believe is attributable to increased adoption of Agile practices by our customers.

        Perpetual license revenue decreased by $0.7 million from fiscal 2011 to fiscal 2012. In fiscal 2012, we decreased our sales organization's focus on selling perpetual licenses and also increased our prices for perpetual licenses, which contributed to the decrease in overall perpetual license sales.

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        Perpetual license revenue increased by $2.9 million from fiscal 2010 to fiscal 2011. Although the same number of customers purchased perpetual licenses in fiscal 2010 and 2011, the customers that purchased perpetual licenses in 2011 purchased, in the aggregate, a greater number of seats.

        Professional services revenue increased $1.1 million from fiscal 2011 to fiscal 2012. In fiscal 2012, we continued to increase our professional services and capabilities related to Agile software development methodologies. In addition, we increased our product related training with the goal of enhancing our customers' knowledge and use of our solutions.

        Professional services revenue increased $1.4 million from fiscal 2010 to fiscal 2011. The increase was driven by higher demand for our services to help companies implement Agile software development methodologies.

Cost of Revenue

	Fiscal Year Ended January 31,
										% Change from 2010 to 2011			% Change from 2011 to 2012
	2010			2011			2012
	(dollars in thousands)
Cost of revenue:
Product	$	1,990		$	3,033		$	4,096			52	%		35	%
Professional services		3,373			4,846			5,679			44	%		17	%
Total cost of revenue	$	5,363		$	7,879		$	9,775
Gross profit:
Product		86	%		87	%		88	%
Professional services		19	%		13	%		15	%
Total gross profit		71	%		74	%		76	%

        Cost of product revenue increased $1.1 million from fiscal 2011 to fiscal 2012. The increase was primarily comprised of a $0.5 million increase in personnel and related expenses and a $0.4 million increase in licenses and permits related to additional software licenses as a result of the increase in the number of paid seats.

        Cost of product revenue increased $1.0 million from fiscal 2010 to fiscal 2011. The increase was primarily comprised of a $0.4 million increase in depreciation expense as a result of large computer equipment and software purchases in fiscal 2011 and a $0.3 million increase in personnel and related expenses.

        Cost of professional services revenue increased $0.8 million from fiscal 2011 to fiscal 2012 primarily due to an increase of $0.6 million in personnel and related expenses.

        Cost of professional services revenue increased $1.5 million from fiscal 2010 to fiscal 2011 primarily due to an increase of $1.1 million in personnel and related expenses.

Operating Expenses

Sales and Marketing

	Fiscal Year Ended January 31,
										% Change from 2010 to 2011			% Change from 2011 to 2012
	2010			2011			2012
	(dollars in thousands)
Sales and marketing	$	13,407		$	18,526		$	23,552			38	%		27	%
Percentage of total revenue		73	%		62	%		57	%

        Sales and marketing expenses increased $5.0 million from fiscal 2011 to fiscal 2012. The increase was primarily due to an increase of $4.0 million in personnel and related expenses. We also incurred $0.6 million of increased marketing costs paid to outside third parties to supplement our internal marketing team. Travel and entertainment expenses increased $0.4 million as a result of our larger sales

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and marketing teams and an increase in travel related to our international expansion and an increased number of marketing events.

        Sales and marketing expenses increased $5.1 million from fiscal 2010 to fiscal 2011. The increase was primarily due to an increase of $4.1 million in personnel and related expenses. We also incurred $0.6 million of increased marketing expenses, mainly in the form of sponsorships and marketing events. Travel and entertainment expenses increased $0.3 million as a result of our larger sales and marketing teams and an increase in travel related to our international expansion and an increased number of marketing events.

Research and Development

	Fiscal Year Ended January 31,
										% Change from 2010 to 2011			% Change from 2011 to 2012
	2010			2011			2012
	(dollars in thousands)
Research and development	$	5,230		$	7,979		$	11,074			53	%		39	%
Percentage of total revenue		29	%		27	%		27	%

        Research and development expenses increased $3.1 million from fiscal 2011 to fiscal 2012. The increase was primarily due to an increase of $2.8 million in personnel and related expenses to enhance existing solutions and add new functionality to our solutions.

        Research and development expenses increased $2.7 million from fiscal 2010 to fiscal 2011. This increase was primarily due to an increase of $2.1 million in personnel and related expenses to enhance existing solutions and add new functionality to our solutions.

General and Administrative

	Fiscal Year Ended January 31,
										% Change from 2010 to 2011			% Change from 2011 to 2012
	2010			2011			2012
	(dollars in thousands)
General and administrative	$	3,875		$	5,074		$	8,170			31	%		61	%
Percentage of total revenue		21	%		17	%		20	%

        General and administrative expenses increased $3.1 million from fiscal 2011 to fiscal 2012. The increase was primarily due to an increase of $1.8 million in personnel and related expenses. Professional fees also increased $0.8 million for accounting, audit, legal and tax services incurred as a result of our growth, the change in our year-end and changes we made in anticipation of becoming a public company.

        General and administrative expenses increased $1.2 million from fiscal 2010 to fiscal 2011. The increase was primarily due to an increase of $0.6 million in personnel and related expenses. Professional fees increased $0.2 million for accounting, audit, legal and tax services due to our growth. Table of Contents

Other (Expense) Income

	Fiscal Year Ended January 31,
	2010			2011			2012
	(dollars in thousands)
Other (expense) income
Interest and other income	$	9		$	72		$	53
Interest expense		(233	)		(251	)		(349	)
Loss on foreign currency transactions and other gain (loss)		(20	)		(12	)		(50	)
Total	$	(244	)	$	(191	)	$	(346	)

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        Other (expense) income increased $0.2 million from fiscal 2011 to fiscal 2012. This increase was due to an increase in interest expense related to our preferred stock warrants.

        Other (expenses) income decreased $0.1 million from fiscal 2010 to fiscal 2011. The decrease was attributable to a tax rebate of $0.1 million that partially offset other expenses in fiscal 2011 and did not exist in 2010.

Quarterly Results of Operations

        The following tables set forth selected unaudited quarterly statements of operations data for the last eleven fiscal quarters, as well as the percentage of total revenue that each line item represents. The information for each of these quarters has been prepared on the same basis as the audited annual financial statements included elsewhere in this prospectus and, in the opinion of management, includes all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the results of operations for these periods. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of operating results for future periods.

	Quarter Ended
	April 30, 2010			July 31, 2010			Oct. 31, 2010			Jan. 31, 2011			April 30, 2011			July 31, 2011			Oct. 31 2011			Jan. 31, 2012			April 30, 2012			July 31, 2012			October 31, 2012
	(unaudited) (in thousands)
Revenue:
Subscription and support	$	4,165		$	4,699		$	5,263		$	5,775		$	6,462		$	7,382		$	8,371		$	8,910		$	9,530		$	10,457		$	11,419
Perpetual license		1,403			447			942			1,468			1,440			720			604			782			1,611			1,407			1,252
Total product revenue		5,568			5,146			6,205			7,243			7,902			8,102			8,975			9,692			11,141			11,864			12,671
Professional services		1,352			1,310			1,322			1,564			1,806			1,870			1,415			1,563			1,837			1,763			2,078
Total revenue		6,920			6,456			7,527			8,807			9,708			9,972			10,390			11,255			12,978			13,627			14,749
Cost of revenue:
Product		675			785			790			784			923			1,066			1,062			1,045			1,153			1,226			1,437
Professional services		1,102			1,240			1,216			1,288			1,402			1,464			1,426			1,387			1,586			1,830			1,880
Total cost of revenue		1,777			2,025			2,006			2,072			2,325			2,530			2,488			2,432			2,739			3,056			3,317
Gross profit		5,143			4,431			5,521			6,735			7,383			7,442			7,902			8,823			10,239			10,571			11,432
Operating expenses:
Sales and marketing		3,932			4,359			4,654			5,581			5,656			5,475			5,930			6,491			7,005			6,537			7,226
Research and development		1,540			1,887			2,164			2,387			2,508			2,828			2,836			2,901			3,041			3,505			4,153
General and administrative		1,134			1,283			1,344			1,312			1,571			1,655			2,699(1)			2,245			2,302			2,567			2,739
Sublease termination income(2)		—			—			—			—			—			—			—			—			(839	)		—			—
Total operating expenses		6,606			7,529			8,162			9,280			9,735			9,958			11,465			11,637			11,509			12,609			14,118
Loss from operations		(1,463	)		(3,098	)		(2,641	)		(2,545	)		(2,352	)		(2,516	)		(3,563	)		(2,814	)		(1,270	)		(2,038	)		(2,686	)
Other (expense) income:
Interest expense		(69	)		(55	)		(54	)		(74	)		(236	)		(73	)		(22	)		(19	)		(438	)		(237	)		(46	)
Other (expense) income and (losses) gains		(6	)		46			(6	)		26			(30	)		39			(5	)		(1	)		(13	)		15			(19	)
Net loss	$	(1,538	)	$	(3,107	)	$	(2,701	)	$	(2,593	)	$	(2,618	)	$	(2,550	)	$	(3,590	)	$	(2,834	)	$	(1,721	)	$	(2,260	)		(2,751	)

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	Quarter Ended
	April 30, 2010			July 31, 2010			Oct. 31, 2010			Jan. 31, 2011			April 30, 2011			July 31, 2011			Oct. 31 2011			Jan. 31, 2012			April 30, 2012			July 31, 2012			October 31, 2012
	(as a percentage of total revenue)
Revenue:
Subscription and support		60	%		73	%		70	%		66	%		67	%		74	%		81	%		79	%		73	%		77	%		77	%
Perpetual license		20			7			13			17			15			7			6			7			13			10			9
Total product revenue		80			80			83			83			82			81			87			86			86			87			86
Professional services		20			20			17			17			18			19			13			14			14			13			14
Total revenue		100			100			100			100			100			100			100			100			100			100			100
Cost of revenue:
Product		10			12			11			9			10			11			10			9			9			9			9
Professional services		16			19			16			14			14			14			14			13			12			13			13
Total cost of revenue		26			31			27			23			24			25			24			22			21			22			22
Gross profit		74			69			73			77			76			75			76			78			79			78			78
Operating expenses:
Sales and marketing		57			68			62			63			58			55			57			57			54			48			49
Research and development		22			29			29			27			26			28			28			26			23			26			28
General and administrative		16			20			17			15			16			17			26	(1)		20			18			19			19
Sublease termination income(2)		—			—			—			—			—			—			—			—			(6	)		—			—
Total operating expenses		95			117			108			105			100			100			110			103			89			93			96
Loss from operations		(21	)		(48	)		(35	)		(28	)		(24	)		(25	)		(34	)		(25	)		(10	)		(15	)		(18	)
Other (expense) income:
Interest expense		(1	)		(1	)		(1	)		(1	)		(3	)		(1	)		—			—			(3	)		(2	)		(1	)
Other (expense) income and (losses) gains		—			1			—			—			—			—			—			—			—			—			—
Net loss		(22	)%		(48	)%		(36	)%		(29	)%		(27	)%		(26	)%		(35	)%		(25	)%		(13	)%		(17	)%		(19	)%

(1)

The increase related primarily to the timing of certain audit and consulting fees incurred as a result of the change in our fiscal year-end as well as compensation expense of $0.3 million relating to the repurchase in August 2011 of shares of preferred stock from our executive officers. See the section titled "Certain Relationships and Related Party Transactions—Stock Repurchases" for additional information.

(2)

In April 2012, the sublease for our corporate headquarters was terminated as a result of the sale of the building by the building's owner. The transaction was deemed a termination of the original lease and we derecognized the remaining deferred rent expense. See Note 14 of our consolidated financial statements for additional information.

Seasonality and Quarterly Trends

        Our customers tend to follow budgeting cycles, buying solutions at the beginning and end of a calendar year. We tend to experience some seasonality associated with bookings, perpetual license revenue and cash flow from operations in the first and fourth quarters of each fiscal year. Our cash flow from operations has historically been higher in the first quarter of each fiscal year than in other quarters. We generally do not experience seasonality associated with subscription and support revenue due to the fact we recognize subscription and support revenue over the term of the contract or support period.

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Liquidity and Capital Resources

	Fiscal Year Ended January 31,									Nine Months Ended October 31,
	2010			2011			2012			2011			2012
										(unaudited)
	(in thousands)
Net cash provided by (used in) operating activities	$	(5,340	)	$	(5,743	)	$	(1,704	)	$	(1,408	)	$	3,235
Net cash used in investing activities		(368	)		(3,060	)		(1,925	)		(1,792	)		(1,987	)
Net cash provided by (used in) financing activities		18,597			(2,537	)		18,515			18,493			(1,096	)
Net increase (decrease) in cash and cash equivalents	$	12,889		$	(11,340	)	$	14,886		$	15,293		$	152

	As of January 31,						As of October 31,
	2010		2011		2012		2011		2012
							(unaudited)
	(in thousands)
Cash and cash equivalents	$	15,906	$	4,566	$	19,452	$	19,859	$	19,604

        To date, we have financed our operations primarily through sales of our capital stock, and to a lesser extent, borrowing on our credit facilities.

        At October 31, 2012, our cash and cash equivalents of $19.6 million were held for working capital purposes. We believe that our existing cash and cash equivalents and the amount available pursuant to our credit facilities will be sufficient to meet our anticipated cash needs for at least the next twelve months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, particularly internationally, and the introduction of new and enhanced solutions and professional service offerings. In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition could be adversely affected.

Loan and Security Agreement

        We have a loan and security agreement with Square 1 Bank with a maximum borrowing availability of $12.0 million, of which $3.0 million is available for our corporate credit card line and letters of credit. On January 31, 2013, we extended the maturity on our loan and security agreement from February 2013 to February 2014. At October 31, 2012, the amount available under the loan and security agreement, considering the borrowing base calculation, was $7.0 million. At October 31, 2012, we had a letter of credit outstanding for $2.5 million that reduced the amount available pursuant to the revolving line of credit to $4.5 million. The letter of credit represents the security deposit associated with the ten-year operating lease commitment we executed in the first quarter of fiscal 2013.

        Other than the outstanding letter of credit that has the loan and security agreement as collateral, no amounts were outstanding on the loan and security agreement as of January 31, 2012 and October 31, 2012. Advances under the loan and security agreement bear interest at the prime rate then in effect plus 3.00%, with a floor of 5.25%.

        The loan is secured by substantially all of our assets and includes a restriction on our ability to pledge our intellectual property. The loan and security agreement includes financial covenants and other customary affirmative and negative covenants. The primary financial covenant is an adjusted quick ratio. The adjusted quick ratio is defined as the cash at the bank plus accounts receivable less than 90 days old from invoice date as compared to current liabilities excluding deferred revenue. We

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must maintain an adjusted quick ratio of at least 1.10 to 1.00. Other restrictive covenants under the loan and security agreement include covenants with respect to creating liens on our assets, incurring additional debt, paying dividends or making other distributions, making investments, consummating certain mergers or acquisitions, making payments on subordinate debt, entering into certain transactions with affiliates, transferring funds to other financial institutions and effecting sales or other dispositions of our assets or business without the prior consent of Square 1 Bank. We were in compliance with our covenants as of October 31, 2012. The loan and security agreement also contains usual and customary events of default (subject to certain threshold amounts and grace periods) on the occurrence of events such as nonpayment of amounts due under the loan and security agreement, violation of the restrictive covenants referred to above, violation of other contractual provisions, a material adverse change in our business, attachment of our assets, our insolvency or certain other events.

Components of Liquidity and Capital Resources

Operating Activities

        For the nine months ended October 31, 2012, cash provided by operating activities was $3.2 million, which reflects our net loss of $6.7 million, adjusted by non-cash charges of $1.9 million consisting primarily of $0.7 million for stock-based compensation, $0.7 million for the change in valuation of preferred stock warrants, and $1.3 million for depreciation and amortization, partially offset by $0.8 million in non-cash income related to the early termination of our sublease. Sources of cash inflows were from fluctuations in our working capital of $8.0 million. The fluctuations in our working capital were primarily attributable to an increase in deferred revenue as a result of an increase in sales, cash receipts exceeding the increase in sales resulting in a decrease in accounts receivable and an increase in deferred rent expense primarily due to an $0.8 million lease incentive payment we received in connection with entering into our new ten-year lease for our corporate headquarters. Our days sales outstanding were 55 days at October 31, 2012 compared to 66 days at January 31, 2012. Reflected in deferred revenue as well as accounts receivable and, therefore, in days sales outstanding, is a new $1.3 million multi-year subscription we entered into with an existing enterprise customer in September 2012.

        For the nine months ended October 31, 2011, cash used in operating activities was $1.4 million, which reflects our net loss of $8.8 million, adjusted by non-cash charges of $2.2 million consisting primarily of $0.4 million for stock-based compensation, $1.4 million for depreciation and amortization, $0.3 million for the change in valuation of preferred stock warrants and $0.1 million for a non-cash charitable contribution. Sources of cash inflows were from fluctuations in our working capital of $5.1 million. The fluctuations in our working capital were primarily attributable to a decrease in accounts receivable with cash receipts exceeding sales during the period and an increase in deferred revenue as a result of new sales. Our days sales outstanding were 68 days at October 31, 2011 compared to 68 days at January 31, 2011.

        For fiscal 2012, cash used in operating activities was $1.7 million, which reflects our net loss of $11.6 million, adjusted by non-cash charges of $2.9 million consisting primarily of $0.6 million for stock-based compensation, $1.9 million for depreciation and amortization, $0.1 million for a non-cash charitable contribution and $0.3 million for the change in valuation of preferred stock warrants. Sources of cash inflows were from fluctuations in our working capital of $7.0 million. The fluctuations in our working capital were primarily attributable to an increase in accounts receivable with a correspondingly larger increase in deferred revenue as a result of new sales. Our days sales outstanding were 66 days at January 31, 2012 compared to 68 days at January 31, 2011.

        For fiscal 2011, cash used in operating activities was $5.7 million, which reflects our net loss of $9.9 million, adjusted by non-cash charges of $1.5 million consisting primarily of $0.2 million for

55

stock-based compensation, $1.1 million for depreciation and amortization, and $0.2 million for the change in valuation of preferred stock warrants. Sources of cash inflows were from fluctuations in our working capital of $2.7 million. The fluctuations in our working capital were primarily attributable to an increase in accounts receivable with a correspondingly larger increase in deferred revenue as a result of new sales. Our days sales outstanding were 68 days at January 31, 2011 compared to 75 days at January 31, 2010.

        For fiscal 2010, cash used in operating activities was $5.3 million, which reflects our net loss of $9.7 million, adjusted by non-cash charges of $0.8 million consisting primarily of $0.5 million for depreciation and amortization, $0.2 million for stock-based compensation, and $0.1 million for the change in valuation of preferred stock warrants. Sources of cash inflows were from fluctuations in our working capital of $3.6 million. The fluctuations in our working capital were primarily attributable to an increase in accounts receivable with a correspondingly larger increase in deferred revenue as a result of new sales. Our days sales outstanding were 75 days at January 31, 2010 compared to 80 days at January 31, 2009.

        A significant portion of our subscription renewals are invoiced in December and January of each year, which under our typical customer payment terms generally creates positive cash flow from operations in the first quarter of each fiscal year, which is, in turn, historically offset in subsequent quarters, resulting in cash used in operations for the full fiscal year. Although historically cash flow from operations has been negative in the second quarter through the fourth quarter of a fiscal year, we generated $0.1 and $1.9 million in cash flow from operations in the second quarter and third quarter of fiscal 2013, respectively. Our cash used in operations remained relatively flat from fiscal 2010 to fiscal 2011 and improved by $4.0 million from fiscal 2011 to fiscal 2012. Our headcount increased from 155 at the end of fiscal 2010 to 232 at the end of fiscal 2011 to 285 at the end of fiscal 2012. Our headcount at October 31, 2012 was 343. We expect to continue with investments in headcount and our ability to generate positive cash flow from operations for a full fiscal year will depend on revenue and the resulting cash receipts increasing at a rate that is faster than our on-going investment in personnel, facilities and our systems.

Investing Activities

        Our investing activities consist primarily of capital expenditures to purchase computer equipment and software, furniture and fixtures as well as leasehold improvements and business combinations. In the future, we expect to continue to invest in capital expenditures to support our expanding operations and seek complimentary, accretive acquisitions.

        During the nine months ended October 31, 2012, cash used in investing activities of $2.0 million was attributable to capital expenditures for computer hardware primarily to support our increase in headcount during the period and data center hardware to support our growth during the period and the acquisition of Agile Advantage, Inc.

        During the nine months ended October 31, 2011, cash used in investing activities of $1.8 million was attributable to capital expenditures for hardware and software for our data centers to support our growth as well as computer hardware and leasehold improvements attributable to our increase in headcount and our move into our new corporate office. We received a payment from our sub-landlord to reimburse us for leasehold improvements expenditures that we incurred, which is classified within cash flow from operating activities.

        During fiscal 2012, cash used in investing activities of $1.9 million was attributable to capital expenditures for hardware and software for our data centers to support our growth as well as computer hardware and leasehold improvements attributable to our increase in headcount and our move into our new corporate office. We received a payment from our sub-landlord to reimburse us for leasehold improvements expenditures that we incurred, which is classified within cash flow from operations.

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        During fiscal 2011, cash used in investing activities of $3.1 million was attributable to $2.8 million in capital expenditures related to hardware and software for our data centers to support our growth as well as computer hardware and leasehold improvements attributable to our increase in headcount, our move into our new corporate office and $0.3 million in purchase consideration related to the acquisition of Enkari, Ltd.

        During fiscal 2010, cash used in investing activities of $0.4 million was attributable to capital expenditures for hardware for our data centers to support our growth as well as computer hardware attributable to our increase in headcount.

Financing Activities

        Our financing activities consist primarily of proceeds from preferred stock private placements, proceeds from debt financing offset by debt repayments, proceeds from the exercises of common stock options offset by a disbursement associated with a preferred stock repurchase and capital lease payments.

        During the nine months ended October 31, 2012, cash used in financing activities of $1.1 million was attributable to $0.1 million in proceeds from common stock option exercises offset by $1.2 million in deferred offering costs related to our pending initial public offering.

        During the nine months ended October 31, 2011, cash provided by financing activities was primarily attributable to proceeds from the closing of our Series E preferred stock financing of $19.9 million, net of offering costs, partially offset by a payment representing a preferred stock repurchase of $1.4 million.

        During fiscal 2012, cash provided by financing activities of $18.5 million was attributable to proceeds from the closing of our Series E preferred stock financing of $19.9 million, net of offering costs, and $0.1 million from the exercise of common stock options partially offset by a payment representing a preferred stock repurchase of $1.4 million and $0.1 million in payments on our capital lease obligations.

        During fiscal 2011, cash used in financing activities of $2.5 million was attributable to $0.3 million in proceeds from common stock option exercises offset by $2.7 million in note payable payments and $0.1 million in payments on our capital lease obligations.

        During fiscal 2010, cash provided by financing activities of $18.6 million was attributable to proceeds from our Series D preferred stock financing of $15.9 million, net of offering costs, $0.1 million in proceeds from common stock option exercises and proceeds from borrowing on a note payable of $3.1 million net of $0.4 million in note payable payments and $0.1 million in payments on our capital lease obligations.

Contractual Payment Obligations

        The following summarizes our contractual commitments and obligations as of January 31, 2012:

	Payment Due by Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
	(in thousands)
Operating lease obligations	$	1,489	$	741	$	748	$	—	$	—
Capital lease obligations		31		31		—		—		—
	$	1,520	$	772	$	748	$	—	$	—

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        The following summarizes our contractual commitments and obligations as of October 31, 2012:

	Payment Due by Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
	(in thousands)
Operating lease obligations	$	14,969	$	1,998	$	3,443	$	3,194	$	6,334
Capital lease obligations		2		2		—		—		—
	$	14,971	$	2,000	$	3,443	$	3,194	$	6,334

Off-Balance Sheet Arrangements

        During fiscal 2010, 2011 and 2012 and the nine months ended October 31, 2012, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special-purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies

        We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

        The following critical accounting policies reflect significant judgments and estimates used in the preparation of our consolidated financial statements:

•

revenue recognition and deferred revenue;

•

stock-based compensation;

•

capitalized software costs; and

•

income taxes.

Revenue Recognition and Deferred Revenue

        Revenue Recognition.    We generate revenue primarily from three sources: (1) subscription and support; (2) perpetual licenses; and (3) professional services.

        Revenue is recognized when all of the following conditions have been met:

•

there is persuasive evidence of an arrangement;

•

the service has been provided or the product has been delivered;

•

the price is fixed or determinable; and

•

collection of the fees is sufficiently assured.

        Signed agreements, which may include purchase orders, are used as evidence of an arrangement. In cases where both a signed contract and a purchase order exist, we consider the signed contract to be persuasive evidence of the arrangement. Product delivery occurs when we provide the customer with access to the software via an electronic notification or license key. We assess whether a fee is fixed or

58

determinable at the outset of the arrangement, primarily based on the payment terms associated with the transaction. We assess collectability of the fee based on a number of factors such as collection history and creditworthiness of the customer. If we determine that collectability is not sufficiently assured, revenue is deferred until collectability becomes sufficiently assured, generally upon receipt of cash.

        Subscription and support revenue is recognized ratably over the contract term beginning on the commencement date of each contract.

        When multiple deliverables included in an arrangement are separable into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based on their relative selling prices. Multiple deliverable arrangement accounting guidance provides a hierarchy to use when determining the relative selling price for each unit of accounting. This guidance provides that vendor-specific objective evidence, or VSOE, of selling price, based on the price at which the item is regularly sold by the vendor on a stand-alone basis, should be used if it exists. We use VSOE to determine the stand-alone selling prices of subscription, hosting, maintenance and professional services because substantially all separate sales of these deliverables fall within a reasonable range of prices. All unique product offerings are grouped based upon size of customer as a result of our tiered volume pricing. VSOE for professional services is determined regardless of customer size as customer size does not significantly impact the prices charged. We have concluded that all products and services for each single unit of accounting have VSOE, other than perpetual licenses discussed below.

        We monitor compliance with VSOE by using a bell curve approach. Sales of subscription, hosting, maintenance and professional services are analyzed to determine whether 80% of the transactions are within plus or minus 15% of the median of the transactions for an appropriate group of customers.

        When VSOE exists for all undelivered elements of the contract, perpetual license fee revenue is generally recognized upon delivery of the software product to the customer, provided the other conditions above are met. We have established VSOE for all undelivered elements of our perpetual license arrangements. Maintenance revenue consists of fees for providing unspecified software updates on a when and if available basis and technical support for software products. Hosting revenue relates to fees for hosting the software the customer has purchased at our data centers. Hosting and maintenance revenue is recognized ratably over the term of the agreement.

        Professional services revenue is accounted for separately from subscription and perpetual license revenue when they have VSOE and, for subscriptions, stand-alone value to the customer. Professional services are generally provided on a time-and-materials basis. The services that are provided on a time-and-materials basis are recognized as services are provided. However, professional services that do not have stand-alone value to the customer are recognized ratably over the remaining subscription period.

        Deferred Revenue.    Our deferred revenue comprises unrecognized subscription and support, perpetual licenses, and prepaid professional services revenue. With the exception of perpetual licenses, these arrangements are initially recorded as deferred revenue upon the commencement of the subscription and maintenance period, and revenue is recognized in the consolidated statements of operations ratably over the term of the arrangement. Perpetual licenses are generally recognized upon delivery of the software product to the customer. Prepaid professional services arrangements are recorded initially as deferred revenue and are recognized when the services are performed.

Stock-Based Compensation

        We account for stock-based compensation in accordance with the authoritative guidance on stock compensation. Under the fair value recognition provisions of this guidance, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expenses, net of

59

estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award.

        Determining the fair value of stock-based awards at the grant date requires judgment. We use the Black-Scholes option-pricing model to determine the fair value of stock options. The determination of the grant date fair value of options using an option-pricing model is affected by our estimated common stock fair value as well as assumptions regarding a number of other complex and subjective variables. These variables include the fair value of our common stock, the expected term of the options, our expected stock price volatility, risk-free interest rates, and expected dividends, which are estimated as follows:

•

Fair value of our common stock.  Because our stock is not publicly traded, we must estimate the fair value of common stock, as discussed in "—Common Stock Valuations" below.

•

Expected term.  The expected term represents the period that our stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, we have based our expected term on the simplified method, which represents the average period from vesting to the expiration of the award.

•

Expected volatility.  As we do not have a trading history for our common stock, the expected stock price volatility for our common stock was estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. We did not rely on implied volatilities of traded options in our industry peers' common stock because the volume of activity was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available.

•

Risk-free rate.  The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.

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Dividend yield.  We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

        If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously.

        The following table presents the weighted-average assumptions used to estimate the fair value of options granted during the periods presented:

	Fiscal Year Ended January 31,			Nine Months Ended October 31,
	2010	2011	2012	2011	2012
				(unaudited)
Expected term (in years)	6.25	5.45 - 6.08	5.69 - 6.08	5.69 - 6.08	5.91 - 6.08
Expected volatility	75.0%	68.5% - 75.0%	58.3% - 59.2%	58.3% - 59.2%	57.9% - 58.3%
Risk-free rate	2.02% - 3.19%	1.55% - 2.84%	1.08% - 2.70%	1.63% - 2.70%	0.79% - 1.40%
Dividend yield	0.0%	0.0%	0.0%	0.0%	0.0%

Common Stock Valuations

        The fair value of the common stock underlying our stock options was determined by our Board of Directors, which intended that all options granted have an exercise price that is not less than the estimated fair value of a share of our common stock underlying those options on the date of grant. The valuations of our common stock were determined in accordance with the guidelines outlined in the

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American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The assumptions we used in the valuation model were based on future expectations combined with management judgment. In the absence of a public trading market, our Board of Directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock as of the date of each option grant, including the following factors:

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contemporaneous third-party valuations performed at periodic intervals by a valuation firm;

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the prices, rights, preferences and privileges of our preferred stock relative to the common stock;

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the purchases of shares of preferred stock by unaffiliated venture capital firms;

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our operating and financial performance and forecast;

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current business conditions;

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significant new customer wins;

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the hiring of key personnel;

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our stage of development;

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the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an initial public offering or sale of our company, given prevailing market conditions;

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any adjustment necessary to recognize a lack of marketability for our common stock;

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the market performance of comparable publicly-traded technology companies; and

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the U.S. and global capital market conditions.

        We have granted stock options with the following exercise prices since February 1, 2011:

Grant Date	Number of Options Granted		Exercise Price Per Share		Common Stock Fair Value Per Share at Grant Date		Aggregate Fair Value of Options Granted
February 2011		184,045	$	0.89	$	0.89	$	163,800
August 2011		1,764,875		2.19		2.19		3,865,076
November 2011		358,065		2.37		2.37		848,614
March 2012		85,650		2.49		2.49		213,269
May 2012		150,500		3.53		3.53		531,265
July 2012		77,900		4.18		4.18		325,622
November 2012		125,450		4.31		4.31		540,690
February 2013		38,060		4.31		4.31		164,039
March 2013		380,950		4.31		4.31		1,641,895

        Based upon the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, the aggregate intrinsic value of options outstanding as of January 31, 2013 was $             million, of which $             million related to vested options and $             million related to unvested options.

        In order to determine the fair value of our common stock underlying option grants, we considered contemporaneous valuations of our stock from an independent valuation firm that provided us with their estimation of our enterprise value and the allocation of that value to each element of our capital structure (preferred stock, common stock, warrants and options). For stock options granted in or prior to February 2011, our enterprise value was estimated using the market-based approach and, within the market-based approach, the comparable company method and the recent transaction method. The

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market-based approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of technology companies.

        A database of all publically traded companies was screened to determine a broad industry sector and potential peer-group companies. This initial screen selected companies that primarily operated in the information technology software and services industry and that (i) traded on one of the major U.S. stock exchanges, (ii) traded at a common per share value of greater than one dollar, and (iii) exhibited average six month daily trading volume of greater than 50,000 shares. From this industry sector list, comparable companies were selected based on several factors, including business description, business model, primary industry and revenue growth. More specifically, the comparable company selection focused on companies that provide cloud-based offerings. Furthermore, companies with historical and projected revenue growth comparable to that of Rally were selected.

        The selected group of comparable companies was consistently used in both the market and income approaches. Additionally, this same comparable company group was partially relied upon in determining appropriate multiples in the initial public offering, or IPO, scenario of the probability-weighted expected return model, or PWERM, described more fully below. Where relevant, the comparable company group was held constant in determining per share value for all equity classes. For the March 31, 2012 valuation completed in May 2012, the comparable companies were reassessed due to changes in our outlook and industry. Two of the ten comparable companies were changed. The only other changes to the comparable companies occurred when companies were acquired. In such instances, where data was available, these companies were included in the recent transaction method of the market-based approach.

        For stock options granted in or after August 2011, our Board of Directors determined the best approach was to use a blend of market and income approaches to determine our enterprise value and PWERM to determine the related allocation. Future and present values for the common stock were calculated taking into consideration the preferred share liquidation and conversion rights. PWERM models potential future liquidity events and applies probabilities to each scenario. These future liquidity events are then discounted to present value and, after applying the relevant probability for each potential event, result in a probability-weighted equity value of the company.

        Significant factors considered by our Board of Directors in determining the fair value of our common stock at these grant dates include:

        February 2011.    The United States economy and the financial markets continued to recover from the global financial crisis that began in 2008. Total revenue increased from $7.5 million for the three months ended October 31, 2010 to $8.8 million for the three months ended January 31, 2011. As our cash and cash equivalents were $4.6 million at January 31, 2011, our Board of Directors considered the improving economy and encouraged management to begin planning for a future round of financing. We performed a valuation of our common stock as of December 31, 2010 utilizing the option pricing method and determined the fair value to be $0.89 per share. The valuation utilized the following inputs: (i) time to expiration of 4.0 years; (ii) risk-free interest rate of 1.52%; (iii) volatility of 68.4%; and (iv) a discount for lack of marketability of 45%. We determined we had an enterprise value of $95.4 million. Based on this valuation and other factors described herein, our Board of Directors granted options to purchase 184,045 shares of common stock with an exercise price of $0.89 per share.

        August 2011.    The United States economy continued to grow in the second and third calendar quarters of 2011; however, volatility in the financial markets increased significantly during the period reflecting global financial uncertainties. Total revenue increased slightly from $9.7 million for the three months ended April 30, 2011 to $10.0 million for the three months ended July 31, 2011. Subscription and support revenue increased sequentially by $0.9 million, while perpetual license revenue declined sequentially by $0.7 million. In May 2011, we raised $20.0 million through the sale of Series E preferred stock at a price of $5.15 per share. The financing was led by Meritech Capital Partners, which invested $10.0 million. Meritech Capital Partners did not previously hold an ownership interest in us. In

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addition, in June 2011, we signed an arrangement with a global enterprise customer for a large number of seats, which represented the second largest sale in our history. We performed a valuation of our common stock as of May 31, 2011 utilizing the PWERM allocation methodology. The present values calculated for our common stock under the possible outcomes were weighted based on management's estimates of the probability of each outcome occurring. Management's estimates were 40% for an IPO, 35% for a strategic merger or sale, 20% for continuing as a private company, and 5% for dissolution. We determined the enterprise value under the market approach using the financial information of companies in our peer group and under the income approach using a weighted-average cost of capital or discount rate of 31%, a decrease from 36.5% in February 2011. The decrease in the discount rate was based on several company-specific and general economic factors, primarily the closing of the financing led by Meritech Capital Partners. The blended enterprise value was $149.7 million. Based on these factors, the PWERM analysis resulted in an estimated fair value of our common stock of $2.19 per share. Our Board of Directors determined that there were no significant factors affecting the value of our common stock between May 31, 2011 and the grant date. Based on this valuation and other factors described herein, our Board of Directors granted options to purchase 1,764,875 shares of common stock with an exercise price of $2.19 per share.

        November 2011.    The United States economy continued to stabilize through the fourth calendar quarter of 2011. Although the broader financial markets continued to experience volatility and were negatively impacted by the European sovereign debt concerns, select technology companies were able to complete IPOs during this period. Total revenue increased from $10.0 million for the three months ended July 31, 2011 to $10.4 million for the three months ended October 31, 2011. Subscription and support revenue increased sequentially by $1.0 million, while professional services revenue decreased sequentially by $0.5 million. We performed the same PWERM allocation methodology as in the previous calendar quarter to value our common stock as of September 30, 2011. Management's estimates of the probability of each scenario remained unchanged from our prior valuation and were 40% for an IPO, 35% for a strategic merger or sale, 20% for continuing as a private company, and 5% for dissolution. We determined the enterprise value under the market approach using the financial information of companies in our peer group and under the income approach using a weighted-average cost of capital or discount rate of 31%, which was constant from August 2011. The blended enterprise value was $157.5 million. Based on these factors, the PWERM analysis resulted in an estimated fair value of our common stock of $2.37 per share. Based on this valuation and other factors described herein, our Board of Directors granted options to purchase 358,065 shares of common stock with an exercise price of $2.37 per share.

        March 2012.    The United States economy and financial markets continued to strengthen during the first calendar quarter of 2012. We also continued to see strength in our business during this period. Total revenue increased from $10.4 million for the three months ended October 31, 2011 to $11.3 million for the three months ended January 31, 2012, while subscription and support revenue increased sequentially by $0.6 million. We performed the same PWERM allocation methodology as in the previous calendar quarter to value our common stock as of January 31, 2012. Management's estimates of the probability of each scenario remained unchanged from our prior valuation and were 40% for an IPO, 35% for a strategic merger or sale, 20% for continuing as a private company, and 5% for dissolution. We determined the enterprise value under the market approach using the financial information of