UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from                  to                 

Commission File Number: 001-38056

YEXT, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-8059722
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

61 Ninth Avenue

New York, NY 10011

(Address of principal executive offices, including zip code)

(212) 994-3900

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	YEXT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller

reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).    Yes  ☐  No  ☒

As of November 23, 2022, the registrant had 122,098,247 shares of common stock, $0.001 par value per share outstanding.

TABLE OF CONTENTS

			PAGE
PART I.		FINANCIAL INFORMATION
	Item 1	Financial Statements	5
		Condensed Consolidated Balance Sheets (Unaudited)	5
		Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	6
		Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	7
		Condensed Consolidated Statements of Cash Flows (Unaudited)	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
	Item 4	Controls and Procedures	32
PART II.		OTHER INFORMATION
	Item 1	Legal Proceedings	33
	Item 1A	Risk Factors	33
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	58
	Item 3	Defaults Upon Senior Securities	58
	Item 4	Mine Safety Disclosures	58
	Item 5	Other Information	58
	Item 6	Exhibits	59
SIGNATURES

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, and our officers and representatives may from time to time make, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “could,” “would,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:

•our future revenue, cost of revenue, operating expenses and cash flows;

•anticipated trends, growth rates and challenges in our business and in the markets in which we operate;

•the effect of the coronavirus (“COVID-19”) pandemic and its variants, including the effect of governmental restrictions and regulations as well as precautionary measures undertaken by businesses, on our business, operations, and financial results and the business and operations of our customers and potential customers;

•our beliefs, objectives and strategies for future operations, including plans to invest in international expansion, research and development, and our sales and marketing teams, and the impact of such investments on our operations;

•changes in management and anticipated effects thereof;

•our ability to increase sales of our products;

•maintaining and expanding our end-customer base and our relationships with our Knowledge Network; and

•sufficiency of cash to meet cash needs for at least the next 12 months.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us 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 trends discussed in this Quarterly Report on Form 10-Q 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, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, whether written or oral, except as required by law.

In this Quarterly Report on Form 10-Q, the words “we,” “us,” “our” and “Yext” refer to Yext, Inc. and its wholly owned subsidiaries, unless the context requires otherwise.

4

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

YEXT, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

	October 31, 2022		January 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	162,268	$	261,210
Accounts receivable, net of allowances of $995 and $2,042, respectively	68,027		101,607
Prepaid expenses and other current assets	14,887		13,538
Costs to obtain revenue contracts, current	30,368		33,998
Total current assets	275,550		410,353
Property and equipment, net	65,308		74,604
Operating lease right-of-use assets	86,617		97,124
Costs to obtain revenue contracts, non-current	20,619		27,286
Goodwill	4,235		4,572
Intangible assets, net	199		217
Other long term assets	3,578		6,179
Total assets	$	456,106	$	620,335
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities	$	48,252	$	48,432
Unearned revenue, current	153,267		223,427
Operating lease liabilities, current	17,847		18,845
Total current liabilities	219,366		290,704
Operating lease liabilities, non-current	102,613		113,776
Other long term liabilities	4,276		3,985
Total liabilities	326,255		408,465
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 50,000,000 shares authorized at October 31, 2022 and January 31, 2022; zero shares issued and outstanding at October 31, 2022 and January 31, 2022	—		—
Common stock, $0.001 par value per share; 500,000,000 shares authorized at October 31, 2022 and January 31, 2022; 141,658,521 and 137,662,320 shares issued at October 31, 2022 and January 31, 2022, respectively; 122,747,392 and 131,156,986 shares outstanding at October 31, 2022 and January 31, 2022, respectively	141		137
Additional paid-in capital	886,185		834,429
Accumulated other comprehensive loss	(6,751)		(187)
Accumulated deficit	(668,744)		(610,604)
Treasury stock, at cost	(80,980)		(11,905)
Total stockholders’ equity	129,851		211,870
Total liabilities and stockholders’ equity	$	456,106	$	620,335

See the accompanying notes to the condensed consolidated financial statements.

5

YEXT, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

	Three months ended October 31,				Nine months ended October 31,
	2022		2021		2022		2021
Revenue	$	99,280	$	99,529	$	298,951	$	289,645
Cost of revenue	25,663		25,255		77,473		73,724
Gross profit	73,617		74,274		221,478		215,921
Operating expenses:
Sales and marketing	49,360		58,548		164,244		172,292
Research and development	17,649		17,986		53,770		50,343
General and administrative	18,740		22,094		60,619		61,284
Total operating expenses	85,749		98,628		278,633		283,919
Loss from operations	(12,132)		(24,354)		(57,155)		(67,998)
Interest income	587		5		797		15
Interest expense	(211)		(113)		(483)		(403)
Other (expense) income, net	(156)		(191)		111		(1,018)
Loss from operations before income taxes	(11,912)		(24,653)		(56,730)		(69,404)
(Provision for) benefit from income taxes	(398)		(273)		(1,410)		(745)
Net loss	$	(12,310)	$	(24,926)	$	(58,140)	$	(70,149)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.10)	$	(0.19)	$	(0.46)	$	(0.55)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted	123,500,961		128,570,237		126,239,773		126,967,336
Other comprehensive loss:
Foreign currency translation adjustment	$	(1,127)	$	(1,586)	$	(6,548)	$	(1,239)
Unrealized loss on marketable securities, net	(16)		—		(16)		—
Total comprehensive loss	$	(13,453)	$	(26,512)	$	(64,704)	$	(71,388)

See the accompanying notes to the condensed consolidated financial statements.

6

YEXT, INC.

Condensed Consolidated Statements of Stockholders' Equity

(In thousands)

(Unaudited)

						Accumulated
				Additional		Other						Total
	Common Stock			Paid-In		Comprehensive		Accumulated		Treasury		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Stock		Equity
Balance, January 31, 2021	123,989	$	130	$	733,933	$	2,422	$	(517,345)	$	(11,905)	$	207,235
Exercise of stock options	2,220	2		19,195		—		—		—		19,197
Vested restricted stock units converted to common shares	4,402	4		(4)		—		—		—		—
Issuance of restricted stock	15	—		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	531	1		6,484		—		—		—		6,485
Stock-based compensation	—	—		74,821		—		—		—		74,821
Other comprehensive loss	—	—		—		(2,609)		—		—		(2,609)
Net loss	—	—		—		—		(93,259)		—		(93,259)
Balance, January 31, 2022	131,157	137		834,429		(187)		(610,604)		(11,905)		211,870
Exercise of stock options	208	—		526		—		—		—		526
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes	2,992	3		(1,960)		—		—		—		(1,957)
Issuance of common stock under employee stock purchase plan	796	1		3,814		—		—		—		3,815
Stock-based compensation	—	—		49,376		—		—		—		49,376
Repurchase of common stock	(12,406)	—		—		—		—		(69,075)		(69,075)
Other comprehensive loss	—	—		—		(6,564)		—		—		(6,564)
Net loss	—	—		—		—		(58,140)		—		(58,140)
Balance, October 31, 2022	122,747	$	141	$	886,185	$	(6,751)	$	(668,744)	$	(80,980)	$	129,851

See the accompanying notes to the condensed consolidated financial statements.

7

YEXT, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine months ended October 31,
	2022		2021
Operating activities:
Net loss	$	(58,140)	$	(70,149)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	13,098		12,490
Bad debt expense	381		826
Stock-based compensation expense	48,990		54,455
Amortization of operating lease right-of-use assets	6,684		6,934
Other, net	1,180		506
Changes in operating assets and liabilities:
Accounts receivable	30,296		34,317
Prepaid expenses and other current assets	(1,747)		965
Costs to obtain revenue contracts	8,173		(8,654)
Other long term assets	1,232		43
Accounts payable, accrued expenses and other current liabilities	3,910		3,841
Unearned revenue	(64,786)		(39,423)
Operating lease liabilities	(8,158)		(4,041)
Other long term liabilities	795		615
Net cash used in operating activities	(18,092)		(7,275)
Investing activities:
Capital expenditures	(5,400)		(12,333)
Net cash used in investing activities	(5,400)		(12,333)
Financing activities:
Proceeds from exercise of stock options	561		15,869
Repurchase of common stock	(68,695)		—
Payments for taxes related to net share settlement of stock-based compensation awards	(1,846)		—
Payments of deferred financing costs	(284)		(263)
Proceeds, net from employee stock purchase plan withholdings	1,947		4,059
Net cash (used in) provided by financing activities	(68,317)		19,665
Effect of exchange rate changes on cash and cash equivalents	(7,133)		(942)
Net decrease in cash and cash equivalents	(98,942)		(885)
Cash and cash equivalents at beginning of period	261,210		230,411
Cash and cash equivalents at end of period	$	162,268	$	229,526

See the accompanying notes to the condensed consolidated financial statements.

8

YEXT, INC.

Notes to Condensed Consolidated Financial Statements

1. Organization and Description of Business

Description of Business

Yext, Inc. ("Yext" or the "Company") organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants. The Yext platform lets businesses structure the facts about their brands in a database called the Knowledge Graph. The platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which the Company refers to as its Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. The Yext platform powers all of the Company's key features, including Listings, Pages, and Answers, along with its other features and capabilities.

Fiscal Year

The Company's fiscal year ends on January 31st. References to fiscal 2023, for example, are to the fiscal year ending January 31, 2023.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 18, 2022 (the "Form 10-K"). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of January 31, 2022, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results for the three and nine months ended October 31, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending January 31, 2023, or any other period.

There have been no material changes to the Company's significant accounting policies as described in the Form 10-K.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of those financial statements and the reported amounts of revenue and expense during the reporting period. These estimates include, but are not limited to, the standalone selling prices of performance obligations, the incremental borrowing rate associated with lease liabilities, the useful life of capitalized costs to obtain revenue contracts, income taxes, and the valuation and assumptions underlying stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.

Segment Information

The Company is the provider of the Yext platform and operates as one operating segment. An operating segment is defined as a component of an enterprise for which separate financial information is evaluated regularly by the chief operating decision makers ("CODM"). The Company defines its CODM as its executive officers, and their role is to make decisions about allocating resources and assessing performance. The Company's business operates as one operating segment as all of the Company's offerings operate on the Yext platform and are deployed in an identical way, with its CODM evaluating the Company's financial information, resources and performance of these resources on a consolidated basis. Since the Company operates as one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

9

Concentration of Credit Risk

Certain financial instruments that could be exposed to a concentration of credit risk include cash and cash equivalents and accounts receivable. The Company deposits its cash with financial institutions, and such deposits, at times, may exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents to date. Collateral is not required for accounts receivable. At October 31, 2022 and January 31, 2022, no single customer accounted for more than 10% of the Company's accounts receivable. No single customer accounted for more than 10% of the Company's revenue for the three and nine months ended October 31, 2022 and 2021, respectively.

Marketable Securities

The Company's investments in marketable securities may consist of debt securities, including U.S. treasury securities, corporate bonds, and commercial paper. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. The Company considers all of its investments in marketable securities, irrespective of the maturity date, as available for use in current operations, and therefore classifies these securities within current assets on the condensed consolidated balance sheets. All marketable securities are carried at estimated fair value. Credit losses related to marketable securities are recorded, net in the condensed consolidated statements of operations and comprehensive loss through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. As of October 31, 2022 and January 31, 2022, no credit losses related to marketable securities were recorded by the Company. Any remaining unrealized gains or losses for marketable securities are included in accumulated other comprehensive income (loss), as a component of stockholders’ equity.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts, provided such contracts had been appropriately accounted for under ASC 606 by the acquiree, rather than recognizing them at their estimated fair value on the acquisition date as required under the existing guidance. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 on a prospective basis, with early adoption permitted. This standard is effective for the Company in fiscal year 2024. We do not expect the adoption of this standard to have a significant impact on its consolidated financial statements.

3. Revenue

Performance Obligations

The Company has identified that it has two distinct performance obligations: subscription and associated support to the Yext platform and professional services. The Company's revenue is predominantly related to its subscription and associated support to the Yext platform. Professional services revenue accounted for approximately 9% and 8% of the Company's total revenue for the nine months ended October 31, 2022 and 2021, respectively.

Geographic Region

The Company disaggregates its revenue from contracts with customers by geographic region, as it believes this best depicts how the nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors. Revenue by geographic region is determined based on the region of the Company's contracting entity, which may be different than the region of its customers. The following table presents the Company's revenue by geographic region:

	Three months ended October 31,				Nine months ended October 31,
(in thousands)	2022		2021		2022		2021
North America	$	80,826	$	79,083	$	240,617	$	229,782
International	18,454		20,446		58,334		59,863
Total revenue	$	99,280	$	99,529	$	298,951	$	289,645

North America revenue is attributable to the United States. International revenue is predominantly attributable to European countries, but also includes Japan.

The Company's revenue attributable to the United States represented 80% of total revenue, revenue attributable to England, which serves as the Company's main contracting entity for Europe, represented 18% of total revenue, and no other individual country represented more than 10% of total revenue for the nine months ended October 31, 2022.

The Company's revenue attributable to the United States represented 79% of total revenue, revenue attributable to England, which serves as the Company's main contracting entity for Europe, represented 19% of total revenue, and no other individual country represented more than 10% of total revenue for the nine months ended October 31, 2021.

10

Contract Liabilities

A contract liability is an obligation to transfer goods or services for which consideration has been received or is due to a customer. The Company's contract liabilities consist primarily of unearned revenue and, to a lesser extent, customer deposits.

As of October 31, 2022, unearned revenue, current was $153.3 million, while unearned revenue, non-current, which is included within other long term liabilities on the Company's condensed consolidated balance sheet, was $0.1 million. Revenue recognized of $195.5 million during the nine months ended October 31, 2022 was included in unearned revenue at the beginning of the period.

Customer deposits represent payments received in advance in instances where a revenue contract is cancelable in nature, and therefore the Company does not have an unconditional obligation to transfer control to a customer. As of October 31, 2022 and January 31, 2022, customer deposits of $0.6 million and $0.2 million were included in accounts payable, accrued expenses and other current liabilities on the Company's condensed consolidated balance sheet, respectively.

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, and contract terms. As of October 31, 2022, the Company had $365.4 million of remaining performance obligations, of which $312.8 million is expected to be recognized as revenue over the next twenty-four months, with the remaining balance expected to be recognized thereafter. As of January 31, 2022, the Company had $404.9 million of remaining performance obligations.

4. Investments in Marketable Securities

The following tables summarize the Company's investments in marketable securities:

	October 31, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	83,339	$	—	$	—	$	83,339
U.S. treasury securities	24,495		—		(16)		24,479
Total marketable securities	$	107,834	$	—	$	(16)	$	107,818
	January 31, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	138,470	$	—	$	—	$	138,470
U.S. treasury securities	—		—		—		—
Total marketable securities	$	138,470	$	—	$	—	$	138,470

As of October 31, 2022 and January 31, 2022, the Company's marketable securities have a maturity of 90 days or less and are classified as cash and cash equivalents. During the three and nine months ended October 31, 2022 and 2021, the Company had no material reclassification adjustments from accumulated other comprehensive loss to net loss.

The Company classifies interest income on investments in marketable securities, amortization of premiums and discounts, and realized gains and losses on securities available for sale within interest income in the condensed consolidated statements of operations and comprehensive loss.

The Company regularly reviews its debt securities and monitors the surrounding economic conditions to assess the risk of expected credit losses. As of October 31, 2022 and January 31, 2022, the unrealized losses and the related risk of expected credit losses were not significant.

5. Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive (loss) income when they occur. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the assets or liabilities, such as inherent risk, transfer restrictions, and credit risk.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

11

Level 1 inputs are based on quoted prices in active markets for identical assets or liabilities. 

Level 2 inputs are based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. 

Level 3 inputs are based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities, and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability.

The Company's assets measured at fair value on a recurring basis, by level, within the fair value hierarchy are as follows:

	October 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	83,339	$	—	$	—	$	83,339
U.S. treasury securities (1)	—		24,479		—		24,479
Included in cash and cash equivalents	$	83,339	$	24,479	$	—	$	107,818
	January 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	138,470	$	—	$	—	$	138,470
U.S. treasury securities (1)	—		—		—		—
Included in cash and cash equivalents	$	138,470	$	—	$	—	$	138,470

(1) The Company's U.S. treasury securities purchased with an original maturity of less than three months from the purchase date are classified as cash and cash equivalents on its condensed consolidated balance sheet.

The Company’s cash equivalents and marketable securities for the periods presented were valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs and were classified as Level 1 or Level 2, accordingly.

6. Goodwill

As of October 31, 2022 and January 31, 2022, the Company had goodwill of $4.2 million and $4.6 million, respectively. The changes to goodwill during these periods relate to foreign currency.

Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level, which is at or one level below the operating segment level. The Company operates as one operating segment, which represents its one reporting unit. The test for impairment is conducted annually each November 1st, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company determined that no events occurred or circumstances changed that would more likely than not reduce the fair value of the Company's reporting unit below its carrying amount during the nine months ended October 31, 2022 and 2021. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.

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7. Property and Equipment, Net

Property and equipment are recorded at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. Property and equipment, net consisted of the following:

(in thousands)	October 31, 2022		January 31, 2022
Computer software	$	20,335	$	18,814
Office equipment	21,155		18,854
Furniture and fixtures	8,368		8,163
Leasehold improvements	62,662		62,784
Construction in progress	35		936
Software in progress	1,075		1,342
Total property and equipment, gross	113,630		110,893
Less: accumulated depreciation	(48,322)		(36,289)
Total property and equipment, net	$	65,308	$	74,604

As of October 31, 2022 and January 31, 2022, the Company's property and equipment, net attributable to the United States was 89% and 90%, respectively. No other individual country represented more than 10% of the total property and equipment, net as of those periods. Depreciation expense was $4.4 million and $13.1 million for the three and nine months ended October 31, 2022, respectively and $4.4 million and $12.0 million for the three and nine months ended October 31, 2021, respectively.

8. Accounts Payable, Accrued Expenses and Other Current Liabilities

        Accounts payable, accrued expenses and other current liabilities consisted of the following:

(in thousands)	October 31, 2022		January 31, 2022
Accounts payable	$	4,758	$	9,218
Accrued employee compensation	21,450		17,589
Accrued Knowledge Network application provider fees	3,152		2,885
Accrued professional services and associated costs	2,107		2,663
Accrued employee stock purchase plan withholdings liability	530		2,397
Other current liabilities	16,255		13,680
Total accounts payable, accrued expenses and other current liabilities	$	48,252	$	48,432

As of October 31, 2022 and January 31, 2022, capital expenditures of $0.2 million and $0.9 million were included in accounts payable, accrued expenses and other current liabilities, respectively.

9. Stock-Based Compensation

2008 Equity Incentive Plan

        The Company's 2008 Equity Incentive Plan (the "2008 Plan"), as amended on March 10, 2016, allowed for the issuance of up to 25,912,531 shares of common stock. Awards granted under the 2008 Plan may be incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), restricted stock and restricted stock units. The 2008 Plan is administered by the Company's Board of Directors, which determines the terms of the options granted, the exercise price, the number of shares subject to option and the option vesting period. No ISO or NQSO is exercisable after 10 years from the date of grant, and option awards will typically vest over a four-year period.

        The 2008 Plan was terminated in connection with the adoption of the Company's 2016 Equity Incentive Plan (the "2016 Plan") in December 2016, and since the 2008 Plan termination the Company has not granted and will not grant any additional awards under the 2008 Plan. However, the 2008 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.

2016 Equity Incentive Plan

        In December 2016, the Company's Board of Directors adopted, and its stockholders approved, the 2016 Plan. The number of shares reserved for issuance under the 2016 Plan will increase on the first day of each fiscal year during the term of the 2016 Plan by the lesser of: (i) 10,000,000 shares, (ii) 4% of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company's Board of Directors may determine. On February 1, 2022, the number of shares of common stock available for issuance under the 2016 Plan was automatically increased according to its terms by 5,246,279 shares. In addition, the shares reserved for issuance under the 2016 Plan also include shares returned to the 2008 Plan as the result of

13

expiration or termination of options or other awards. As of October 31, 2022, the number of shares available for future award under the 2016 Plan is 3,898,183.

Stock Options

       The following table summarizes the activity related to the Company's stock options:

	Outstanding Stock Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Balance, January 31, 2022	6,620,701	$	7.28	4.32	$	11,723
Granted	—	$	—
Exercised	(207,623)	$	2.57
Forfeited or canceled	(1,722,245)	$	10.16
Balance, October 31, 2022	4,690,833	$	6.43	3.35	$	1,708
Vested and expected to vest	4,690,833	$	6.43	3.35	$	1,708
Exercisable at October 31, 2022	4,690,833	$	6.43	3.35	$	1,708

The aggregate intrinsic value of options vested and expected to vest and exercisable is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of October 31, 2022. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.

The aggregate intrinsic value of exercised options was $0.7 million and $11.6 million for the nine months ended October 31, 2022 and 2021, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

Restricted Stock and Restricted Stock Units

        The following table summarizes the activity related to the Company's restricted stock and restricted stock units:

	Outstanding	Weighted-Average Grant Date Fair Value
Balance as of January 31, 2022	10,184,214	$	14.38
Granted	7,955,218	$	6.33
Vested and converted to shares	(3,398,302)	$	14.00
Forfeited or canceled	(3,073,625)	$	12.86
Balance as of October 31, 2022	11,667,505	$	8.84

The estimated weighted-average grant date fair value of restricted stock and restricted stock units granted was $6.33 and $13.22 per share for the nine months ended October 31, 2022 and 2021, respectively. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.

Employee Stock Purchase Plan

In March 2017, the Company's Board of Directors adopted, and its stockholders approved, the 2017 Employee Stock Purchase Plan ("ESPP"), which became effective on the date it was adopted. The number of shares of the Company's common stock that will be available for sale to employees under the ESPP increases annually on the first day of each fiscal year in an amount equal to the lesser of: (i) 2,500,000 shares; (ii) 1% of the outstanding shares of the Company's common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the administrator may determine. On February 1, 2022, the number of shares of common stock available for issuance under the ESPP was automatically increased according to its terms by 1,311,569 shares. As of October 31, 2022, a total of 4,058,651 shares of the Company's common stock are available for sale to employees under the ESPP.

In connection with the offering period which ended on March 15, 2022, 457,595 shares of common stock were purchased under the ESPP at a purchase price of $5.14 per share for total proceeds of $2.4 million. In connection with the offering period which ended on September 15, 2022, 339,019 shares of common stock were purchased under the ESPP at a purchase price of $4.31 per share for total proceeds of $1.5 million.

A new offering period began on September 15, 2022 and will end on March 15, 2023. As of October 31, 2022, 478,607 shares are estimated to be purchased at the end of the offering period and $0.5 million has been withheld on behalf of employees for these future purchases under the ESPP and is included in accounts payable, accrued expenses and other current liabilities.

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The Black-Scholes option pricing model assumptions used to calculate the fair value of shares, estimated at commencement, to be purchased during an ESPP offering period were as follows:

	Three months ended October 31,		Nine months ended October 31,
	2022	2021	2022	2021
Expected life (years)	0.50	0.50	0.50	0.50
Expected volatility	63.52%	45.54%	48.87% - 63.52%	45.54% - 59.24%
Dividend yield	—	—	—	—
Risk-free rate	3.78%	0.05%	0.86% - 3.78%	0.05% - 0.06%

The expected life assumptions were based on each offering period's respective purchase date. The Company estimated the expected volatility assumption based on the historical volatility of its stock price. The risk-free rate assumptions were based on the U.S. treasury yield curve in effect at commencement of the offering period. The dividend yield assumption was zero as the Company has not historically paid any dividends and does not expect to declare or pay any dividends in the foreseeable future.

During the three and nine months ended October 31, 2022, the Company recorded stock-based compensation expense associated with the ESPP of $0.3 million and $1.0 million, respectively and $0.5 million and $1.6 million for the three and nine months ended October 31, 2021, respectively. As of October 31, 2022, total unrecognized compensation cost related to ESPP was $0.6 million, net of estimated forfeitures, which will be amortized over a weighted-average remaining period of 0.37 years.

A new offering period commences on the first trading day on or after March 15th and September 15th each year, or on such other date as the administrator will determine, and will end on the first trading day, approximately six months later, on or after September 15th and March 15th, respectively. Participants may purchase the Company’s common stock through payroll deductions, up to a maximum of 15% of their eligible compensation. Unless changed by the administrator, the purchase price for each share of common stock purchased under the ESPP will be 85% of the lower of the fair market value per share on the first trading day of the applicable offering period or the fair market value per share on the last trading day of the applicable offering period.

Performance-based Restricted Stock Units

In March 2022, the Company made a grant to an executive in the form of 2,000,000 performance-based restricted stock units. This grant was outside of the Company’s 2016 Equity Incentive Plan. These performance-based restricted stock units are subject to the achievement of certain stock price targets. The Company uses a Monte Carlo simulation model to determine the fair value of this award and recognizes expense using the accelerated attribution method over the requisite service period.

Stock-Based Compensation Expense

        Stock-based compensation represents the cost related to stock-based awards granted in lieu of monetary payment. The Company measures stock-based compensation associated with stock-based awards issued to employees at the grant date, based on the estimated fair value of the award, and recognizes expense, net of estimated forfeitures, over the vesting period of the applicable award generally using the straight-line method.

The Company's stock-based compensation expense for the periods presented was as follows:

	Three months ended October 31,				Nine months ended October 31,
(in thousands)	2022		2021		2022		2021
Cost of revenue	$	1,176	$	1,840	$	3,899	$	5,597
Sales and marketing	5,432		6,757		17,957		19,635
Research and development	3,946		5,469		12,668		15,285
General and administrative	4,268		5,389		14,466		13,938
Total stock-based compensation expense	$	14,822	$	19,455	$	48,990	$	54,455

During the three and nine months ended October 31, 2022, the Company capitalized $0.1 million and $0.4 million, respectively of stock-based compensation related to software development, and $0.2 million and $1.2 million for the three and nine months ended October 31, 2021, respectively.

As of October 31, 2022, there was approximately $98.5 million of total unrecognized compensation cost related to unvested stock-based awards, which are expected to be recognized over an estimated remaining weighted-average vesting period of approximately 2.67 years.

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10. Equity

The following table summarizes the changes in stockholders' equity during the nine months ended October 31, 2022:

						Accumulated
				Additional		Other						Total
	Common Stock			Paid-In		Comprehensive		Accumulated		Treasury		Stockholders’
(in thousands)	Shares	Amount		Capital		(Loss)		Deficit		Stock		Equity
Balance, January 31, 2022	131,157	$	137	$	834,429	$	(187)	$	(610,604)	$	(11,905)	$	211,870
Exercise of stock options	123	—		302		—		—		—		302
Vested restricted stock units converted to common shares	1,165	1		(1)		—		—		—		—
Issuance of common stock under employee stock purchase plan	457	1		2,353		—		—		—		2,354
Stock-based compensation	—	—		18,201		—		—		—		18,201
Repurchase of common stock	(4,838)	—		—		—		—		(30,554)		(30,554)
Other comprehensive loss	—	—		—		(3,414)		—		—		(3,414)
Net loss	—	—		—		—		(25,839)		—		(25,839)
Balance, April 30, 2022	128,064	$	139	$	855,284	$	(3,601)	$	(636,443)	$	(42,459)	$	172,920
Exercise of stock options	74	—		191		—		—		—		191
Vested restricted stock units converted to common shares	1,081	1		(1)		—		—		—		—
Stock-based compensation	—	—		16,226		—		—		—		16,226
Repurchase of common stock	(5,386)	—		—		—		—		(28,393)		(28,393)
Other comprehensive loss	—	—		—		(2,007)		—		—		(2,007)
Net loss	—	—		—		—		(19,991)		—		(19,991)
Balance, July 31, 2022	123,833	140		871,700		(5,608)		(656,434)		(70,852)		138,946
Exercise of stock options	11	—		33		—		—		—		33
Vested restricted stock units converted to common shares, net of shares withheld for employee taxes (1)	746	1		(1,958)		—		—		—		(1,957)
Issuance of common stock under employee stock purchase plans	339	—		1,461		—		—		—		1,461
Stock-based compensation	—	—		14,949		—		—		—		14,949
Repurchase of common stock	(2,182)	—		—		—		—		(10,128)		(10,128)
Other comprehensive loss	—	—		—		(1,143)		—		—		(1,143)
Net loss	—	—		—		—		(12,310)		—		(12,310)
Balance, October 31, 2022	122,747	$	141	$	886,185	$	(6,751)	$	(668,744)	$	(80,980)	$	129,851

(1) During the three months ended October 31, 2022, vested awards were settled net, of employee taxes, where common shares issued and outstanding reflect the net amount of awards provided to employees. Historically, a sell to cover methodology was used.

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The following table summarizes the changes in stockholders' equity during the nine months ended October 31, 2021:

						Accumulated
				Additional		Other						Total
	Common Stock			Paid-In		Comprehensive		Accumulated		Treasury		Stockholders’
(in thousands)	Shares	Amount		Capital		Income		Deficit		Stock		Equity
Balance, January 31, 2021	123,989	$	130	$	733,933	$	2,422	$	(517,345)	$	(11,905)	$	207,235
Exercise of stock options	1,069	1		12,110		—		—		—		12,111
Vested restricted stock units converted to common shares	871	1		(1)		—		—		—		—
Issuance of restricted stock	4	—		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	282	—		3,817		—		—		—		3,817
Stock-based compensation	—	—		15,288		—		—		—		15,288
Other comprehensive income	—	—		—		355		—		—		355
Net loss	—	—		—		—		(17,631)		—		(17,631)
Balance, April 30, 2021	126,215	132		765,147		2,777		(534,976)		(11,905)		221,175
Exercise of stock options	402	1		2,273		—		—		—		$	2,274
Vested restricted stock units converted to common shares	1,172	1		(1)		—		—		—		$	—
Issuance of restricted stock	11	—		—		—		—		—		$	—
Stock-based compensation	—	—		20,730		—		—		—		$	20,730
Other comprehensive loss	—	—		—		(8)		—		—		$	(8)
Net loss