ASANA: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Kind 10-Q)

The next dialogue and evaluation of our monetary situation and outcomes of
operations needs to be learn together with our condensed consolidated
monetary statements and associated notes showing elsewhere on this Quarterly
Report on Kind 10-Q and our Annual Report on Kind 10-Ok filed with the SEC on
March 30, 2021. As mentioned within the part titled "Particular Be aware Relating to
Ahead-Wanting Statements," the next dialogue and evaluation accommodates
forward-looking statements that contain dangers and uncertainties, in addition to
assumptions that, in the event that they by no means materialize or show incorrect, might trigger our
outcomes to vary materially from these expressed or implied by such
forward-looking statements. Elements that would trigger or contribute to such
variations embrace, however aren't restricted to, these recognized under, and people
mentioned within the part titled "Danger Elements" included below Half II, Merchandise 1A
under.
Overview
Asana is a piece administration platform that helps groups orchestrate work, from
every day duties to cross-functional strategic initiatives. Over 107,000 paying
prospects use Asana to handle all the things from product launches to advertising
campaigns to organization-wide objective setting. Our platform provides construction to
unstructured work, creating readability, transparency, and accountability to
everybody inside an organization-individuals, crew leads, and executives-so they
perceive precisely who's doing what, by when.
Asana is versatile and relevant to nearly any use case throughout departments
and organizations of all sizes. We designed our platform to be simple to make use of and
intuitive to all customers, no matter function or technical proficiency. Customers can
begin a challenge inside minutes and onboard crew members seamlessly with out
outdoors help. We permit customers to work the way in which they need with the interface
that's proper for them, utilizing lists, calendars, boards, timelines, and workload.
Key Enterprise Metrics
We imagine that our progress and monetary efficiency are dependent upon many
elements, together with the important thing elements described under.
Paying Clients
We're targeted on persevering with to develop the variety of prospects that use our
platform. Our working outcomes and progress alternative rely, partly, on our
capacity to draw new prospects. We imagine now we have important greenfield
alternatives amongst addressable prospects worldwide and we'll proceed to
spend money on our analysis and growth and our gross sales and advertising organizations
to deal with this chance.
As of July 31, 2021, we had over 107,000 paying prospects, in comparison with over
82,000 as of July 31, 2020. We outline a buyer as a definite account, which
might embrace a crew, firm, instructional or authorities establishment,
group, or distinct enterprise unit of an organization, that's on a paid
subscription plan, a free model, or a free trial of certainly one of our paid
subscription plans. A single group could have a number of prospects. We outline
a paying buyer as a buyer on a paid subscription plan.
Clients Spending Over $5,000 and $50,000
We deal with rising the variety of prospects spending over $5,000 and $50,000 on
an annualized foundation as a measure of our capacity to scale inside organizations.
We outline prospects spending over $5,000 and $50,000 as these organizations on a
paid subscription plan that had $5,000 or extra or $50,000 or extra in annualized
GAAP revenues in a given quarter, respectively, inclusive of reductions. As
prospects notice the productiveness advantages we offer, our platform typically
turns into important to managing their work and attaining their goals, which
drives additional adoption and enlargement alternatives, and leads to larger
annualized contract values. We imagine that our capacity to extend the quantity
of those prospects is a vital indicator of the parts of our enterprise,
together with: the continued acquisition of latest prospects, retaining and increasing
our consumer base inside present prospects, our continued funding in product
growth and performance required by bigger organizations, and the expansion
of our direct gross sales drive.

From July 31, 2021, we had 12,806 prospects who spent greater than $ 5,000 who contributed roughly 66% and 65% of revenue for the three and 6 months then ended, respectively. From July 31, 2020, we had 7,933 prospects

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spending over $5,000 who contributed roughly 58% and 57% of income for
the three and 6 months then ended, respectively.
As of July 31, 2021 and 2020, we had 598 and 283 prospects spending over
$50,000, respectively.
Greenback-based Web Retention Price
We anticipate to derive a good portion of our income progress from enlargement
inside our buyer base, the place now we have a possibility to develop adoption of
Asana throughout groups, departments, and organizations. We imagine that our
dollar-based internet retention charge demonstrates our alternative to additional develop
inside our buyer base, notably people who generate larger ranges of
annual revenues.
Our reported dollar-based internet retention charge equals the straightforward arithmetic
common of our quarterly dollar-based internet retention charge for the 4 quarters
ending with the latest fiscal quarter. We calculate our dollar-based internet
retention charge by evaluating our revenues from the identical set of consumers in a
given quarter, relative to the comparable prior-year interval. To calculate our
dollar-based internet retention charge for a given quarter, we begin with the revenues
in that quarter from prospects that generated revenues in the identical quarter of
the prior yr. We then divide that quantity by the revenues attributable to that
similar group of consumers within the prior-year quarter. Present interval revenues
embrace any upsells and are internet of contraction or attrition over the trailing 12
months, however exclude revenues from new prospects within the present interval. We anticipate
our dollar-based internet retention charge to fluctuate in future intervals as a result of a
variety of elements, together with the anticipated progress of our income base, the extent
of penetration inside our buyer base, and our capacity to retain our
prospects.
As of July 31, 2021 and 2020, our dollar-based internet retention charge was over 118%
and over 115%, respectively. As of July 31, 2021 and 2020, our dollar-based internet
retention charge for purchasers spending over $5,000 with us on an annualized foundation
was over 125%. Our dollar-based internet retention charge for purchasers spending over
$50,000 with us on an annualized foundation for a similar intervals was over 145% and
over 140%, respectively.
Affect of COVID-19
On account of the COVID-19 pandemic, we briefly closed our headquarters and
different bodily places of work, required our workers and contractors to work remotely,
and applied journey restrictions, all of which signify a big
disruption in how we function our enterprise. The operations of our companions and
prospects have likewise been disrupted, with a disproportionate impression on
smaller companies that had been notably affected by the pandemic. This impression
was most evident in our general dollar-based internet retention charge, which declined
early within the pandemic, however elevated for the three months ended July 31, 2021,
whereas the dollar-based internet retention charges for purchasers who spent over $5,000
and over $50,000 has remained comparatively constant all through the pandemic.
Whereas the length and extent of the COVID-19 pandemic will depend on future
developments that can't be precisely predicted at the moment, such because the
extent and effectiveness of containment and mitigation actions, the emergence of
variant strains of the virus, and the supply and widespread use of
efficient vaccines, it continues to have opposed results on the worldwide economic system
and the final word societal and financial impression of the COVID-19 pandemic stays
unknown. Particularly, the circumstances attributable to this pandemic might have an effect on the
charge of worldwide IT spending and will adversely have an effect on demand for our platform,
lengthen our gross sales cycles, scale back the worth or length of subscriptions,
negatively impression collections of accounts receivable, scale back anticipated spending
from new prospects, trigger a few of our paying prospects to exit of enterprise,
restrict the flexibility of our direct gross sales drive to journey to prospects and potential
prospects, and have an effect on contraction or attrition charges of our prospects, all of
which might adversely have an effect on our enterprise, outcomes of operations, and monetary
situation throughout fiscal 2022 and doubtlessly future intervals.
Non-GAAP Monetary Measures
The next tables current sure non-GAAP monetary measures for every interval
offered under. Along with our outcomes decided in accordance with GAAP,
we imagine these non-GAAP monetary measures are helpful in
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assess our operational efficiency. See under for an outline of non-GAAP monetary measures and their limitations as an analytical instrument.

                                               Three Months Ended July 31,                 Six Months Ended July 31,
                                                 2021                  2020                 2021                  2020

                                                                           (in hundreds)
Non-GAAP loss from operations              $      (38,582)$ (27,157)$      (71,885)$ (51,074)
Non-GAAP internet loss                          $      (39,764)$ (26,282)$      (73,567)$ (49,968)
Free money movement                             $       (9,267)$ (21,909)$      (16,931)$ (38,972)


Non-GAAP Loss From Operations and Non-GAAP Web Loss
We outline non-GAAP loss from operations as loss from operations plus stock-based
compensation expense and the associated employer payroll tax related to RSUs
in addition to non-recurring prices, reminiscent of direct itemizing bills. The quantity of
employer payroll tax-related gadgets on worker inventory transactions depends
on our inventory worth and different elements which might be past our management and that don't
correlate to the operation of the enterprise. When evaluating the efficiency of
our enterprise and making working plans, we don't take into account these things (for
instance, when contemplating the impression of fairness award grants, we place a higher
emphasis on general stockholder dilution moderately than the accounting fees
related to such grants). We imagine it's helpful to exclude these bills
with the intention to higher perceive the long-term efficiency of our core enterprise and
to facilitate comparability of our outcomes to these of peer firms and over
a number of intervals.
We outline non-GAAP internet loss as internet loss plus stock-based compensation expense
and the associated employer payroll tax related to RSUs, amortization of
low cost and non-cash contractual curiosity expense associated to our senior
obligatory convertible promissory notes, and non-recurring prices reminiscent of direct
itemizing bills.
We use non-GAAP loss from operations and non-GAAP internet loss together with
conventional GAAP measures to judge our monetary efficiency. We imagine that
non-GAAP loss from operations and non-GAAP internet loss present our administration and
traders consistency and comparability with our previous monetary efficiency and
facilitates period-to-period comparisons of operations.
Free Money Circulation
We outline free money movement as internet money utilized in working actions much less money used
for purchases of property and tools and capitalized internal-use software program
prices, plus non-recurring expenditures reminiscent of capital expenditures from the
purchases of property and tools related to the build-out of our
company headquarters in San Francisco, and direct itemizing bills. We imagine
that free money movement is a helpful indicator of liquidity that gives info
to administration and traders, even when adverse, about the amount of money utilized in
our operations apart from that used for investments in property and tools
and capitalized internal-use software program prices, adjusted for non-recurring
expenditures.
Limitations and Reconciliations of Non-GAAP Monetary Measures
Non-GAAP monetary measures have limitations as analytical instruments and mustn't
be thought-about in isolation or as substitutes for monetary info offered
below GAAP. There are a variety of limitations associated to using non-GAAP
monetary measures versus comparable monetary measures decided below GAAP.
For instance, different firms in our trade could calculate these non-GAAP
monetary measures otherwise or could use different measures to judge their
efficiency. As well as, free money movement doesn't mirror our future contractual
commitments and the entire enhance or lower of our money steadiness for a given
interval. All of those limitations might scale back the usefulness of those non-GAAP
monetary measures as analytical instruments. Buyers are inspired to overview the
associated GAAP monetary measures and the reconciliations of those non-GAAP
monetary measures to their most straight comparable GAAP monetary measures and
to not depend on any single monetary measure to judge our enterprise.
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The next tables reconcile probably the most straight comparable GAAP monetary measure to every of those non-GAAP monetary measures. Non-GAAP working loss

                                               Three Months Ended July 31,                    Six Months Ended July 31,
                                                 2021                  2020                    2021                    2020

                                                                              (in hundreds)
Loss from operations                       $      (60,051)$ (33,584)$     (110,033)$ (62,669)

Add:

Inventory-based compensation and associated
employer payroll tax related to RSUs          21,469              5,376                  38,148                   9,358
Direct itemizing bills                                 -              1,051                       -                   2,237

Non-GAAP loss from operations              $      (38,582)$ (27,157)$      (71,885)$ (51,074)



Non-GAAP Web Loss
                                              Three Months Ended July 31,                    Six Months Ended July 31,
                                                2021                  2020                    2021                    2020

                                                                             (in hundreds)
Web loss                                  $      (68,355)$ (41,066)$     (129,013)$ (76,911)
Add:
Inventory-based compensation and associated
employer payroll tax related to RSUs         21,469              5,376                  38,148                   9,358
Amortization of low cost on convertible
notes                                              4,382              5,207                  10,628                   9,609
Non-cash curiosity expense                          2,740              3,150                   6,670                   5,739
Direct itemizing bills                                -              1,051                       -                   2,237
Non-GAAP internet loss                         $      (39,764)$ (26,282)$      (73,567)$ (49,968)



Free Money Circulation
                                               Three Months Ended July 31,                 Six Months Ended July 31,
                                                 2021                  2020                 2021                  2020

                                                                           (in hundreds)
Web money supplied by (utilized in) investing
actions                                 $        9,538          $  

(1,134) $ 3,087$ 25,723
Web money movement generated by financing actions $ 5,471$ 153,577$ 23,392$ 154,480

Web money utilized in working actions $ (8,516)$ (22,116)$ (15,960)$ (40,270)
Much less: Purchases of products and tools

               (12,588)           (10,320)                (29,557)           (12,401)
Capitalized internal-use software program                    (113)              (357)                   (296)              (818)

Add:

Purchases of property and tools for
build-out of company headquarters                11,950              9,650                  28,612             11,308
Direct itemizing bills paid                            -              1,234                     270              3,209
Free money movement                             $       (9,267)$ (21,909)$      (16,931)$ (38,972)


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Parts of Outcomes of Operations
Revenues
We generate subscription revenues from paying prospects accessing our
cloud-based platform. Subscription revenues are pushed primarily by the quantity
of paying prospects, the variety of paying customers inside the buyer base, and
the extent of subscription plan. We acknowledge revenues ratably over the associated
contractual time period starting on the date that the platform is made out there to a
buyer.
As a result of ease of implementation of our platform, revenues from skilled
providers have been immaterial up to now.
Value of Revenues
Value of revenues consists primarily of the price of offering our platform to
free customers and paying prospects and is comprised of third-party internet hosting charges,
third-party and personnel-related bills for our operations and help
personnel, bank card processing charges, and amortization of our capitalized
internal-use software program prices.
As we purchase new prospects and present prospects enhance their use of our
cloud-based platform, we anticipate that our price of revenues will proceed to
enhance in greenback quantity.
Gross Revenue and Gross Margin
Gross revenue, or revenues much less price of revenues, and gross margin, or gross
revenue as a proportion of revenues, has been and can proceed to be affected by
numerous elements, together with the timing of our acquisition of latest prospects,
renewals of and follow-on gross sales to present prospects, prices related to
working our cloud-based platform, and the extent to which we develop our
operations and buyer help organizations. We anticipate our gross revenue to
enhance in greenback quantity and our subscription gross margin to stay comparatively
constant over the long run.
Working Bills
Our working bills encompass analysis and growth, gross sales and advertising,
and normal and administrative bills. Personnel-related bills are probably the most
major factor of working bills and encompass salaries, advantages,
stock-based compensation expense, and, within the case of gross sales and advertising
bills, gross sales commissions. Working bills additionally embrace an allocation of
overhead prices for amenities and shared IT-related bills, together with
depreciation expense.
Analysis and Growth
Analysis and growth bills consist primarily of personnel-related
bills. These bills additionally embrace product design prices, third-party providers
and consulting bills, software program subscriptions and expensed laptop tools
utilized in analysis and growth actions, and allotted overhead prices. A
substantial portion of our analysis and growth efforts are targeted on
enhancing our software program structure and including new options and performance to
our platform. We anticipate persevering with to spend money on innovation and know-how
growth, and consequently, we anticipate analysis and growth bills to
proceed to extend in greenback quantity, however to lower as a proportion of
revenues over time.
Gross sales and Advertising and marketing
Gross sales and advertising bills consist primarily of personnel-related bills and
bills for efficiency advertising and lead era, model advertising, and
sponsorship actions. These bills additionally embrace allotted overhead prices and
travel-related bills. Gross sales commissions earned by our gross sales drive which might be
thought-about incremental and recoverable prices of acquiring a subscription with a
buyer are deferred and amortized on a straight-line foundation over the anticipated
interval of advantage of three years.
We proceed to make investments in our gross sales and advertising group, and we
anticipate gross sales and advertising bills to stay our largest working bills in
greenback quantity. We anticipate our gross sales and advertising bills to proceed to
enhance in greenback quantity however to lower as a proportion of revenues over time,
though the share could fluctuate from quarter to quarter relying on the
extent and timing of our advertising initiatives.
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Common and Administrative
Common and administrative bills consist primarily of personnel-related
bills for our finance, human assets, info know-how, and authorized
organizations. These bills additionally embrace non-personnel prices, reminiscent of outdoors
authorized, accounting, and different skilled charges, software program subscriptions and
expensed laptop tools, sure tax, license, and insurance-related
bills, and allotted overhead prices.
We now have acknowledged and can proceed to acknowledge sure bills as a part of
our transition to a publicly traded firm, consisting {of professional} charges and
different bills. Within the quarters main as much as the itemizing of our Class A standard
inventory on the NYSE, we incurred skilled charges and bills, and within the
quarter of our itemizing we incurred charges paid to our monetary advisors in
addition to different skilled charges and bills associated to such itemizing. We
anticipate to proceed to incur further bills on account of working as a
public firm, together with prices to adjust to the foundations and rules
relevant to firms listed on a U.S. securities trade and prices associated
to compliance and reporting obligations pursuant to the foundations and rules of
the SEC. As well as, as a public firm, we incur further prices related
with accounting, compliance, insurance coverage, and investor relations. Consequently, we
anticipate our normal and administrative bills to proceed to extend in greenback
quantity for the foreseeable future however to typically lower as a proportion of
our revenues over the long term, though the share could fluctuate from
interval to interval relying on the timing and quantity of our normal and
administrative bills.
Curiosity Revenue and Different Revenue (Expense), Web and Curiosity Expense
Curiosity revenue and different revenue (expense), internet consists of revenue earned on our
marketable securities and overseas forex transaction positive aspects and losses.
Curiosity expense consists of contractual curiosity expense and amortization of
the debt low cost on the senior obligatory convertible promissory notes we issued
in January and June 2020 to a belief affiliated with our CEO, and curiosity
expense from our time period mortgage.
Provision for Revenue Taxes
Provision for revenue taxes consists primarily of revenue taxes in sure overseas
jurisdictions during which we conduct enterprise. To this point, now we have not recorded any
U.S. federal revenue tax expense, and our state and overseas revenue tax bills
haven't been materials. We now have recorded deferred tax property for which we
present a full valuation allowance, which primarily embrace internet working loss
carryforwards and analysis and growth tax credit score carryforwards. We anticipate
to keep up this full valuation allowance for the foreseeable future as it's
extra probably than not the deferred tax property is not going to be realized based mostly on our
historical past of losses.
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Outcomes of Operations
The next tables set forth our outcomes of operations for the intervals
offered and as a proportion of our revenues for these intervals. The
period-to-period comparability of monetary outcomes is just not essentially indicative
of monetary outcomes to be achieved in future intervals.
                                                Three Months Ended July 31,                    Six Months Ended July 31,
                                                  2021                  2020                    2021                    2020

                                                                               (in hundreds)
Revenues                                    $       89,478$  52,024$      166,151$  99,730
Value of revenues (1)                                 9,869              7,021                  17,783                  13,227
Gross revenue                                        79,609             45,003                 148,368                  86,503
Working bills:
Analysis and growth (1)                        48,454             25,959                  88,421                  48,342
Gross sales and advertising (1)                             63,930             38,822                 120,714                  74,913
Common and administrative (1)                      27,276             13,806                  49,266                  25,917
Complete working bills                           139,660             78,587                 258,401                 149,172
Loss from operations                               (60,051)           (33,584)               (110,033)                (62,669)
Curiosity revenue and different revenue (expense),
internet                                                   (328)             1,045                    (320)                  1,399
Curiosity expense                                    (7,351)            (8,364)                (17,725)                (15,355)

Loss earlier than provision for revenue taxes             (67,730)           (40,903)               (128,078)                (76,625)
Provision for revenue taxes                             625                163                     935                     286
Web loss                                    $      (68,355)$ (41,066)$     (129,013)$ (76,911)


__________________

(1) Quantities embrace stock-based compensation expense as follows:

                                                 Three Months Ended July 31,                 Six Months Ended July 31,
                                                   2021                  2020                 2021                  2020

                                                                             (in hundreds)
Value of revenues                            $           150          $      54          $          270          $     100
Analysis and growth                             11,250              2,656                  20,390              4,737
Gross sales and advertising                                   5,350              1,522                   9,503              2,621
Common and administrative                            3,631              1,144                   6,249              1,900

Complete stock-based compensation expense $ 20,381$ 5,376$ 36,412$ 9,358

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The next desk presents the parts of our revenue statements, for every of the intervals offered, as a proportion of revenues.

                                                 Three Months Ended July 31,                  Six Months Ended July 31,
                                                 2021                  2020                  2021                  2020

                                                                          (p.c of revenues)
Revenues                                             100  %                100  %                100  %                100  %
Value of revenues                                      11                    13                    11                    13
Gross margin                                          89                    87                    89                    87
Working bills:
Analysis and growth                              54                    50                    53                    48
Gross sales and advertising                                   71                    75                    73                    75
Common and administrative                            30                    27                    30                    26
Complete working bills                             156                   151                   156                   150
Loss from operations                                 (67)                  (65)                  (66)                  (63)
Curiosity revenue and different revenue (expense),
internet                                                       *                  2                        *                  1
Curiosity expense                                      (8)                  (16)                  (11)                  (15)

Loss earlier than provision for revenue taxes               (76)                  (79)                  (77)                  (77)
Provision for revenue taxes                                *                     *                     *                     *
Web loss                                             (76) %                (79) %                (78) %                (77) %


________________
* Lower than 1%
Be aware: Sure figures could not sum as a result of rounding.
Comparability of Three Months Ended July 31, 2021 to Three Months Ended July 31,
2020
Revenues
                   Three Months Ended July 31,
                       2021                   2020        $ Change      % Change

                     ({dollars} in hundreds)
Revenues    $       89,478$ 52,024$ 37,454           72  %


Revenues elevated $37.5 million, or 72%, throughout the three months ended July 31,
2021 in comparison with the three months ended July 31, 2020. The rise in revenues
was primarily as a result of addition of latest paying prospects, a continued shift in
our gross sales combine towards bigger buyer contracts, and revenues generated from our
present paying prospects as mirrored by our dollar-based internet retention charge
of over 118% as of July 31, 2021.
Value of Revenues and Gross Margin
                            Three Months Ended July 31,
                           2021                         2020        $ Change      % Change

                               ({dollars} in hundreds)
Value of revenues     $       9,869$ 7,021$  2,848           41  %
Gross margin                    89   %                    87  %


Value of revenues elevated $2.8 million, or 41%, throughout the three months ended
July 31, 2021 in comparison with the three months ended July 31, 2020. The rise was
primarily as a result of a rise of $1.0 million in personnel-related prices as a result of
elevated headcount, a rise of $0.6 million in third-party internet hosting prices as
we elevated capability to help buyer utilization and progress of our buyer base,
a rise of $0.5 million in bank card processing charges, a rise of
$0.3 million in charges to third-party help distributors, and a rise of
$0.2 million in allotted overhead prices on account of elevated general prices
to help the expansion of our enterprise and associated infrastructure.
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Our gross margin elevated throughout the three months ended July 31, 2021 in contrast
to the three months ended July 31, 2020 as we elevated our revenues, extra
effectively managed third-party internet hosting prices, and realized advantages as a result of
economies of scale ensuing from elevated effectivity with our know-how and
infrastructure.
Working Bills
                                    Three Months Ended July 31,
                                        2021                   2020        $ Change      % Change

                                      ({dollars} in hundreds)
Analysis and growth     $        48,454$ 25,959$ 22,495           87  %
Gross sales and advertising                   63,930                  38,822        25,108           65  %
Common and administrative            27,276                  13,806        13,470           98  %
Complete working bills     $       139,660$ 78,587$ 61,073           78  %


Analysis and Growth
Analysis and growth bills elevated $22.5 million, or 87%, throughout the
three months ended July 31, 2021 in comparison with the three months ended July 31,
2020. The rise was primarily as a result of $17.9 million in personnel-related prices
as a result of elevated headcount and a rise of $3.5 million in allotted overhead
prices on account of elevated general prices to help the expansion of our
enterprise and associated infrastructure.
Gross sales and Advertising and marketing
Gross sales and advertising bills elevated $25.1 million, or 65%, throughout the three
months ended July 31, 2021 in comparison with the three months ended July 31, 2020. The
enhance was primarily as a result of a rise of $12.2 million in personnel-related
bills pushed by larger headcount, a rise of $5.5 million in efficiency
advertising, branding spend, and lead era, a rise of $3.4 million in
allotted overhead prices on account of elevated general prices to help the
progress of our enterprise and associated infrastructure, and a rise of $1.7
million in charges to advertising distributors.
Common and Administrative
Common and administrative bills elevated $13.5 million, or 98%, throughout the
three months ended July 31, 2021 in comparison with the three months ended July 31,
2020. The rise was primarily as a result of a rise of $6.9 million in
personnel-related bills on account of larger headcount, a rise of $2.2
million in allotted overhead prices on account of elevated general prices to
help the expansion of our enterprise and associated infrastructure bills, an
enhance of $1.4 million associated to elevated insurance coverage incurred on account of
changing into a public firm, a rise of $0.8 million in different working
bills, and a rise of $0.4 million associated to skilled charges together with
audit, authorized, and recruiting providers.
Curiosity Revenue, Curiosity Expense, and Different Revenue (Expense), Web
                                               Three Months Ended July 31,
                                                 2021                  2020             $ Change              % Change

                                                  ({dollars} in hundreds)
Curiosity revenue and different revenue
(expense), internet                             $         (328)         $   1,045$  (1,373)                    (131) %
Curiosity expense                                   (7,351)            (8,364)             1,013                      (12) %


Curiosity revenue and different revenue (expense), internet decreased $1.4 million throughout
the three months ended July 31, 2021 in comparison with the three months ended July 31,
2020 due primarily to a rise in losses on overseas forex transactions and
decreased positive aspects from our investments in marketable securities. Curiosity expense
decreased by $1.0 million throughout the three months ended July 31, 2021 in contrast
to the three months ended July 31, 2020, primarily as a result of conversion of the
senior obligatory convertible promissory notes to a belief affiliated with our
CEO.
Comparability of Six Months Ended July 31, 2021 to Six Months Ended July 31, 2020
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Revenues
                  Six Months Ended July 31,
                      2021                 2020        $ Change      % Change

                    ({dollars} in hundreds)
Revenues    $      166,151$ 99,730$ 66,421           67  %


Revenues elevated $66.4 million, or 67%, throughout the six months ended July 31,
2021 in comparison with the six months ended July 31, 2020. The rise in revenues
was primarily as a result of addition of latest paying prospects, a continued shift in
our gross sales combine towards bigger buyer contracts, and revenues generated from our
present paying prospects as mirrored by our dollar-based internet retention charge of
over 118% as of July 31, 2021.
Value of Revenues and Gross Margin
                           Six Months Ended July 31,
                           2021                    2020         $ Change      % Change

                             ({dollars} in hundreds)
Value of revenues     $     17,783$ 13,227$  4,556           34  %
Gross margin                   89   %                 87  %


Value of revenues elevated $4.6 million, or 34%, throughout the six months ended
July 31, 2021 in comparison with the six months ended July 31, 2020. The rise was
primarily as a result of a rise of $1.6 million in personnel-related prices as a result of
elevated headcount, a rise of $1.1 million in bank card processing charges,
a rise of $0.7 million in third-party internet hosting prices as we elevated
capability to help buyer utilization and progress of our buyer base, a rise
of $0.4 million in charges to third-party help distributors, and a rise of
$0.3 million in allotted overhead prices on account of elevated general prices
to help the expansion of our enterprise and associated infrastructure.
Our gross margin elevated throughout the six months ended July 31, 2021 in comparison with
the six months ended July 31, 2020 as we elevated our revenues, extra
effectively managed third-party internet hosting prices, and realized advantages as a result of
economies of scale ensuing from elevated effectivity with our know-how and
infrastructure.
Working Bills
                                   Six Months Ended July 31,
                                      2021                 2020         $ Change       % Change

                                     ({dollars} in hundreds)
Analysis and growth     $       88,421$  48,342$  40,079           83  %
Gross sales and advertising                 120,714                74,913         45,801           61  %
Common and administrative           49,266                25,917         23,349           90  %
Complete working bills     $      258,401$ 149,172$ 109,229           73  %


Analysis and Growth
Analysis and growth bills elevated $40.1 million, or 83%, throughout the
six months ended July 31, 2021 in comparison with the six months ended July 31, 2020.
The rise was primarily as a result of $33.1 million in personnel-related prices due
to elevated headcount and a rise of $5.7 million in allotted overhead
prices on account of elevated general prices to help the expansion of our
enterprise and associated infrastructure.
Gross sales and Advertising and marketing
Gross sales and advertising bills elevated $45.8 million, or 61%, throughout the six
months ended July 31, 2021 in comparison with the six months ended July 31, 2020. The
enhance was primarily as a result of a rise of $23.1 million in personnel-related
bills pushed by larger headcount, a rise of $9.5 million in efficiency
advertising, branding spend, and lead era, a rise of $5.6 million in
allotted overhead prices on account of elevated general prices to help the
progress of our enterprise and associated infrastructure, and a rise of $3.9
million in charges to advertising distributors.
                                       33
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Common and Administrative
Common and administrative bills elevated $23.3 million, or 90%, throughout the
six months ended July 31, 2021 in comparison with the six months ended July 31, 2020.
The rise was primarily as a result of a rise of $12.5 million in
personnel-related bills on account of larger headcount, a rise of $3.7
million in allotted overhead prices on account of elevated general prices to
help the expansion of our enterprise and associated infrastructure bills, an
enhance of $2.8 million associated to elevated insurance coverage incurred on account of
changing into a public firm, a rise of $2.3 million in different working
bills, partially offset by a lower of $0.3 million in charges associated to
skilled charges together with audit, authorized, and recruiting providers.
Curiosity Revenue, Curiosity Expense, and Different Revenue (Expense), Web
                                                Six Months Ended July 31,
                                                2021                 2020              $ Change              % Change

                                                 ({dollars} in hundreds)
Curiosity revenue and different revenue
(expense), internet                             $       (320)$    1,399$  (1,719)                    (123) %
Curiosity expense                                (17,725)            (15,355)            (2,370)                      15  %


Curiosity revenue and different revenue (expense), internet decreased $1.7 million throughout
the six months ended July 31, 2021 in comparison with the six months ended July 31,
2020 due primarily to a rise in losses on overseas forex transactions and
decreased positive aspects from our investments in marketable securities. Curiosity expense
elevated $2.4 million throughout the six months ended July 31, 2021 in comparison with the
six months ended July 31, 2020, primarily as a result of issuance of the senior
obligatory convertible promissory notes to a belief affiliated with our CEO in
January 2020 and June 2020
Liquidity and Capital Sources
Since inception, now we have financed operations primarily by means of the web proceeds
now we have obtained from the gross sales of our most popular inventory and customary inventory, the
issuance of senior obligatory convertible promissory notes in January and June
2020 to a belief affiliated with our CEO, and money generated from the sale of
subscriptions to our platform. We now have generated losses from our operations as
mirrored in our gathered deficit of $670.5 million as of July 31, 2021 and
adverse money flows from working actions for the six months ended July 31,
2021 and 2020. Our future capital necessities will rely upon many elements,
together with income progress and prices incurred to help buyer utilization and progress
in our buyer base, elevated analysis and growth bills to help the
progress of our enterprise and associated infrastructure, and elevated normal and
administrative bills to help being a publicly traded firm.
As of July 31, 2021, our principal sources of liquidity had been money, money
equivalents, and marketable securities together with non-current investments of
$382.3 million.
In April 2020, we entered right into a five-year $40.0 million time period mortgage settlement
with Silicon Valley Financial institution. The settlement offers for a senior secured time period mortgage
facility, in an mixture principal quantity of as much as $40.0 million, for use
for the development of our new company headquarters. Curiosity will accrue on
any excellent steadiness at a floating charge each year equal to the prime charge (as
publicly introduced every now and then by the Wall Road Journal) plus an
relevant margin equal to both (a) 0% if our unrestricted money on the lender
is the same as or lower than $80.0 million, or (b) (0.5)% if our unrestricted money
on the lender is between $80.0 million and $100.0 million, or (c) (1.0)% if our
unrestricted money steadiness on the lender is the same as or higher than $100.0
million. Curiosity shall be payable month-to-month. As of July 31, 2021, $40.0 million
was drawn and $39.3 million was excellent below this time period mortgage.
A considerable supply of our money supplied by working actions is our
deferred income, which is included on our condensed consolidated steadiness sheets
as a legal responsibility. Deferred income consists of the unearned portion of billed charges
for our subscriptions, which is recorded as revenues over the time period of the
subscription settlement. As of July 31, 2021, we had $139.6 million of deferred
income, of which $136.0 million was recorded as a present legal responsibility. This
deferred income will likely be acknowledged as revenues when the entire income
recognition standards are met.
                                       34
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We assess our liquidity primarily by means of our money available in addition to the
projected timing of billings below contract with our paying prospects and
associated assortment cycles. We imagine our present money, money equivalents,
marketable securities, and quantities out there below our senior secured time period mortgage
facility will likely be ample to fulfill our working capital and capital expenditure
necessities for at the very least the following 12 months.
Money Flows
The next desk exhibits a abstract of our money flows for the intervals offered:
                                                  Six Months Ended July 31,
                                                     2021                 2020

                                                        (in hundreds)
Web money utilized in working actions       $      (15,960)            $ 

(40,270)

Web money supplied by investing actions            3,087                

25 723

Web money supplied by financing actions           23,392               

154,480


Working Actions
Our largest supply of working money is money assortment from gross sales of
subscriptions to our paying prospects. Our major makes use of of money from working
actions are for personnel-related bills, advertising bills, and
third-party hosting-related and software program bills. Within the final a number of years, we
have generated adverse money flows from working actions and have
supplemented working capital necessities by means of internet proceeds from the sale of
fairness and equity-linked securities.
Web money utilized in working actions of $16.0 million for the six months ended
July 31, 2021 displays our internet lack of $129.0 million, adjusted by non-cash
gadgets reminiscent of stock-based compensation expense of $36.4 million, amortization of
low cost on convertible notes of $10.6 million, non-cash lease expense of $8.8
million, non-cash curiosity expense of $6.7 million, amortization of deferred
contract acquisition prices of $3.6 million, depreciation and amortization of
$2.4 million, provision for uncertain accounts of $0.8 million, and internet money
inflows of $43.2 million from adjustments in our working property and liabilities.
The web money inflows from adjustments in working property and liabilities primarily
consisted of a $33.7 million enhance in deferred income, ensuing from
elevated billings for subscriptions, a $13.4 million enhance in accrued
bills and different liabilities primarily from a rise in accrued payroll
liabilities, accrued gross sales and value-added taxes, and accrued property and
tools associated to the construct out of our headquarters, a $4.5 million enhance
in working lease liabilities, and a $1.7 million enhance in accounts payable.
These quantities had been partially offset by a $5.6 million enhance in pay as you go
bills and different present property associated to a rise in deferred contract
acquisition prices, a $3.5 million enhance in different property, and a $1.0 million
enhance in accounts receivable as a result of larger buyer billings.
Web money utilized in working actions of $40.3 million for the six months ended
July 31, 2020 displays our internet lack of $76.9 million, adjusted by non-cash gadgets
reminiscent of amortization of low cost on convertible notes of $9.6 million,
stock-based compensation expense of $9.4 million, non-cash lease expense of $6.6
million, non-cash curiosity expense of $5.7 million, amortization of deferred
contract acquisition prices of $1.6 million, depreciation and amortization of
$1.5 million, internet money inflows of $1.2 million from adjustments in our working
property and liabilities, and provision for uncertain accounts of $1.1 million. The
internet money inflows from adjustments in working property and liabilities primarily
consisted of a $10.9 million enhance in deferred income ensuing from
elevated billings for subscriptions, a $3.5 million enhance in accrued
liabilities and different liabilities primarily from a rise in accrued
promoting, and a $1.5 million enhance in accounts payable. These quantities had been
partially offset by a $4.8 million enhance in accounts receivable as a result of larger
buyer billings, a $4.4 million enhance in pay as you go bills and different present
property primarily associated to a rise in deferred contract acquisition prices,
a $4.3 million lower in working lease liabilities and a $1.4 million
enhance in different property.
Investing Actions
Web money supplied by in investing actions of $3.1 million for the six months
ended July 31, 2021 consisted of $81.0 million in maturities of marketable
securities and $0.4 million in gross sales of marketable securities. This was
partially offset by $48.5 million in purchases of marketable securities, $29.6
million in purchases of property and
                                       35
--------------------------------------------------------------------------------

tools from a rise in leasehold enhancements and furnishings and fixtures
primarily associated to the construct out of our new headquarters, and $0.3 million in
capitalized internal-use software program prices.
Web money supplied by investing actions of $25.7 million for the six months
ended July 31, 2020 consisted of $38.9 million in maturities of marketable
securities. This quantity was partially offset by $12.4 million in purchases of
property and tools from a rise in development in progress, and $0.8
million in capitalized internal-use software program prices.
Financing Actions
Web money supplied by financing actions of $23.4 million for the six months
ended July 31, 2021 consisted of $9.0 million in internet proceeds from our time period
mortgage, $9.0 million in proceeds from the train of inventory choices, and $6.1
million in proceeds from our worker inventory buy plan, partially offset by
$0.7 million for the compensation of our time period mortgage.
Web money supplied by financing actions of $154.5 million for the six months
ended July 31, 2020 primarily consisted of $150.0 million of proceeds from the
issuance of a senior obligatory convertible promissory notice in June 2020 to a
belief affiliated with our CEO, $2.9 million in internet proceeds from our time period mortgage,
and $1.8 million in proceeds from the train of inventory choices, partially
offset by $0.2 million in taxes paid associated to the web share settlement of
fairness awards.
Contractual Obligations and Commitments
In the course of the six months ended July 31, 2021, there have been no materials adjustments in our
contractual obligations and different commitments, as disclosed in our Annual Report
on Kind 10-Ok filed with the SEC on March 30, 2021, apart from the amendments to
the working lease for our company headquarters in San Francisco, which
commenced in Could 2020 and expires in October 2033. We anticipate to incur a complete of
roughly $382.7 million of future minimal funds and capital commitments
associated to this lease of as of July 31, 2021.
For additional info on our commitments and contingencies, confer with Be aware 8 in
the condensed consolidated monetary statements contained inside this Quarterly
Report on Kind 10-Q.
In January and June 2020, we issued two unsecured senior obligatory convertible
promissory notes for an mixture principal quantity of $450.0 million, or the
2020 Notes, to a belief affiliated with our CEO, which had been scheduled to mature
on January 30, 2025 and June 26, 2025, respectively. The 2020 Notes had been senior,
unsecured obligations of the Firm. The 2020 Notes bore curiosity at a set
charge of three.5% each year that was compounded yearly and payable in-kind,
leading to an mixture $534.5 million to be due upon settlement. The 2020
Notes could be transformed into shares of our Class B widespread inventory, on the
relevant maturity date, except earlier transformed into shares of our Class B
widespread inventory or redeemed in reference to our chapter, insolvency, or different
comparable occasions. The holder of the 2020 Notes was not entitled to transform the
2020 Notes at any time. The 2020 Notes had been solely convertible into shares of our
Class B widespread inventory at our possibility below sure situations, together with if the
closing worth of our Class A standard inventory for at the very least 20 buying and selling days within the 30
consecutive buying and selling days ending on the final buying and selling day of the instantly
previous calendar quarter equals or exceeds the conversion worth (initially
$31.58 and $31.09 for the January 2020 Convertible Be aware and June 2020
Convertible Be aware, respectively), or upon the incidence of specified company
occasions.

On July 1, 2021, pursuant to the phrases of the 2020 Notes, upon assembly the
closing buying and selling worth standards for non-obligatory conversion, we elected to transform
the excellent principal of $450.0 million, along with the quantity of
curiosity that may have accrued thereon from the efficient date of the 2020
Notes till the maturity date, into 17,012,822 shares of the Firm's Class B
Frequent Inventory based mostly on a conversion worth of $31.58 for the notice issued in
January and $31.09 for the notice issued in June 2020.

In April 2020, we entered right into a $40.0 million time period mortgage settlement with Silicon
Valley Financial institution, as mentioned in Liquidity and Capital Sources above.
Indemnification Agreements
Within the atypical course of enterprise, we enter into agreements of various scope
and phrases pursuant to which we conform to indemnify prospects, distributors, lessors,
enterprise companions, and different events with respect to sure issues, together with,
however not restricted to, losses arising out of the breach of such agreements,
providers to be supplied by us, or
                                       36

————————————————– ——————————

from mental property infringement claims made by third events.
Moreover, in reference to the itemizing of our Class A standard inventory on the
NYSE, now we have entered into indemnification agreements with our administrators and
sure officers and workers that may require us, amongst different issues, to
indemnify them in opposition to sure liabilities which will come up by purpose of their
standing or service as administrators, officers, or workers. No calls for have been
made upon us to offer indemnification below such agreements, and there aren't any
claims that we're conscious of that would have a fabric impact on our monetary
place, outcomes of operations, or money flows.
Off-Stability Sheet Preparations
For all intervals offered on this Quarterly Report on Kind 10-Q, we didn't have
any relationships with unconsolidated organizations or monetary partnerships,
reminiscent of structured finance or particular objective entities, which might have been
established for the aim of facilitating off-balance sheet preparations or
different contractually slim or restricted functions.
Crucial Accounting Insurance policies and Estimates
Our unaudited condensed consolidated monetary statements are ready in
accordance with GAAP. The preparation of those unaudited condensed consolidated
monetary statements requires us to make estimates and assumptions that have an effect on
the reported quantities of property, liabilities, income, bills and associated
disclosures. We consider our estimates and assumptions on an ongoing foundation. Our
estimates are based mostly on historic expertise and numerous different assumptions that
we imagine to be affordable below the circumstances. Our precise outcomes might
differ from these estimates.
There have been no adjustments to our important accounting insurance policies and estimates
throughout the six months ended July 31, 2021 as in comparison with these disclosed in our
Administration's Dialogue and Evaluation of Monetary Situation and Outcomes of
Operations set forth in our Annual Report on Kind 10-Ok filed with the SEC on
March 30, 2021.
Current Accounting Pronouncements
See Be aware 2 to our condensed consolidated monetary statements included in Half
I, Merchandise 1 of this Quarterly Report on Kind 10-Q for extra info concerning
current accounting pronouncements.

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