Acquisitions

9 Months Ended

Oct. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisitions

ACQUISITIONS

On May 3, 2022, we acquired 100% of the issued and outstanding equity securities (the Acquisition) of Attivo Networks, Inc. (Attivo), an identity security and lateral movement protection company. Attivo expands our coverage of critical attack surfaces. Identity is an adjacent security solution that complements our core endpoint solution. The Acquisition closed on May 3, 2022 and has been accounted for as a business combination in accordance with ASC Topic 805, Business Combinations.

We had post-combination expense with a fair value of $32.9 million that was not included in the total purchase consideration, which is comprised of 307,396 of restricted common stock with an aggregate fair value of $10.0 million, and 378,828 assumed options with an aggregate fair value of $11.5 million. Restricted common stock and assumed options will be recognized as stock-based compensation expense. In addition, in connection with the acquisition, certain employees who were promised compensation related to their previous employment agreements will be paid $11.4 million in cash based on continued employment which will be recognized on a straight-line basis as acquisition-related compensation costs. All post-combination expense is expected to be recognized through May

2026. Post-combination compensation expense is subject to adjustment based on continuing service obligations to the Company of certain stockholders of Attivo.

In connection with the Acquisition, we also granted restricted stock units (RSUs) and performance share units (PSUs) under our 2021 Equity Incentive Plan. For further details refer to Note 6. Stock-Based Compensation.

The following table presents the allocation of purchase consideration recorded on our condensed consolidated balance sheet as of the acquisition date (in thousands):

	Amount
Consideration
Cash	$	348,917
Common Stock (6,032,231 shares)(1)	185,885
Fair value of total consideration transferred	$	534,802
Cash and cash equivalents	$	8,836
Accounts receivable	4,867
Prepaid expense and other current assets	3,880
Operating lease right-of-use assets	260
Intangible assets	151,900
Accrued liabilities	(4,270)
Accrued payroll and benefits	(1,113)
Operating lease liabilities	(259)
Deferred revenue	(51,746)
Other liabilities	(2,357)
Deferred tax liability	(7,310)
Total identifiable net assets	102,688
Goodwill	432,114
Total purchase consideration	$	534,802

(1) Consideration calculated using the fair value of the Company’s common stock

The valuation of intangible assets acquired are included in Note 5. Intangible Assets.

The excess of the purchase price over the fair value of net tangible and intangible assets acquired has been assigned to goodwill. Goodwill represents the future benefits resulting from the acquisition that will enhance the value of our product for both new and existing customers and strengthen our competitive position. Goodwill is not deductible for tax purposes.

We incurred $5.5 million of transaction expenses in connection with the Acquisition during the nine months ended October 31, 2022. $3.2 million of these costs were recorded as general and administrative expenses in our consolidated statements of operations, with the remainder allocated to purchase price consideration. No transaction expenses in connection with the Acquisition were recorded during the nine months ended October 31, 2023.