Business Combinations

9 Months Ended

Oct. 31, 2020

Business Combinations [Abstract]

Business Combinations

Business Combinations

On May 7, 2020, we acquired 100% of the issued and outstanding share capital of Keybase, a secure messaging and file-sharing company, for purchase consideration of $42.9 million in cash. The acquisition helps us strengthen the security of our video communications platform by providing end-to-end encryption expertise. The acquisition has been accounted for as a business combination.

In allocating the purchase consideration, $24.3 million was attributed to goodwill, $3.3 million to intangible assets, and $15.3 million to other net assets acquired primarily consisting of cash and cash equivalents of $16.4 million. The goodwill amount represents synergies related to our existing products expected to be realized from the acquisition and assembled workforce. The associated goodwill is not deductible for tax purposes. Acquired intangible assets consisted of developed technology with an estimated useful life of five years. The developed technology had a remaining useful life of 4.5 years as of October 31, 2020, and is amortized using the straight-line method over its estimated useful life.

Not included in the purchase consideration, we also entered into holdback agreements with certain employees for $20.0 million in cash payments, which are subject to such employees’ continued service with us. The holdback amount of $20.0 million will be treated as compensation for research and development over the required service period ranging from one to three years.

Transaction costs incurred in connection with the acquisition were immaterial. The results of operations of Keybase have been included in our condensed consolidated financial statements from the date of the acquisition. Pro forma and historical results of operations of Keybase have not been presented, as the results do not have a material effect on any of the periods presented in our condensed consolidated statements of operations.