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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, 2020
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)
YEXT-20201031_G1.JPG
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, 2020, the registrant had 122,266,596 shares of common stock, $0.001 par value per share outstanding.



TABLE OF CONTENTS
PAGE
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9




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 novel coronavirus ("COVID-19") pandemic, 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;
our ability to increase sales of our products;
maintaining and expanding our end-customer base and our relationships with our Knowledge Network;
the timing and size of capital expenditures related to certain leasehold improvements and other fixed assets; 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, 2020 January 31, 2020
Assets
Current assets:
Cash and cash equivalents
$ 208,996  $ 256,076 
Accounts receivable, net of allowances of $2,754 and $995, respectively
48,687  80,583 
Prepaid expenses and other current assets
17,631  12,730 
Costs to obtain revenue contracts, current
29,114  28,423 
Total current assets
304,428  377,812 
Restricted cash
—  12,100 
Property and equipment, net
71,948  26,200 
Operating lease right-of-use assets
106,889  111,973 
Costs to obtain revenue contracts, non-current
21,046  26,051 
Goodwill
4,714  4,534 
Intangible assets, net
886  1,343 
Other long term assets
5,030  3,607 
Total assets
$ 514,941  $ 563,620 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities
$ 47,633  $ 59,482 
Unearned revenue, current
128,709  176,806 
Operating lease liabilities, current
6,801  8,640 
Total current liabilities
183,143  244,928 
Operating lease liabilities, non-current
123,651  115,187 
Other long term liabilities
7,484  2,293 
Total liabilities
314,278  362,408 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 50,000,000 shares authorized at October 31, 2020 and January 31, 2020; zero shares issued and outstanding at October 31, 2020 and January 31, 2020
—  — 
Common stock, $0.001 par value per share; 500,000,000 shares authorized at October 31, 2020 and January 31, 2020; 128,681,015 and 122,335,709 shares issued at October 31, 2020 and January 31, 2020, respectively; 122,175,681 and 115,830,375 shares outstanding at October 31, 2020 and January 31, 2020, respectively
129  122 
Additional paid-in capital
711,413  636,008 
Accumulated other comprehensive income (loss)
60  (360)
Accumulated deficit
(499,034) (422,653)
Treasury stock, at cost
(11,905) (11,905)
Total stockholders’ equity
200,663  201,212 
Total liabilities and stockholders’ equity
$ 514,941  $ 563,620 
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,
2020 2019 2020 2019
Revenue
$ 89,061  $ 76,370  $ 262,467  $ 217,451 
Cost of revenue
21,639  20,366  64,807  56,108 
Gross profit
67,422  56,004  197,660  161,343 
Operating expenses:
Sales and marketing
56,646  61,969  171,215  160,738 
Research and development
14,475  13,011  43,641  35,603 
General and administrative
18,061  23,857  57,993  57,392 
Total operating expenses
89,182  98,837  272,849  253,733 
Loss from operations
(21,760) (42,833) (75,189) (92,390)
Interest income
1,129  524  3,412 
Interest expense
(184) (81) (475) (213)
Other expense, net
(38) (682) (545) (1,091)
Loss from operations before income taxes
(21,973) (42,467) (75,685) (90,282)
(Provision for) benefit from income taxes
(68) (250) (696) (685)
Net loss
$ (22,041) $ (42,717) $ (76,381) $ (90,967)
Net loss per share attributable to common stockholders, basic and diluted
$ (0.18) $ (0.38) $ (0.64) $ (0.82)
Weighted-average number of shares used in computing net loss per share attributable to common stockholders, basic and diluted
120,721,555  113,464,608  118,594,452  110,610,473 
Other comprehensive (loss) income:
Foreign currency translation adjustment
$ (497) $ 1,585  $ 420  $ 1,000 
Unrealized (loss) gain on marketable securities, net
—  (2) —  40 
Total comprehensive loss
$ (22,538) $ (41,134) $ (75,961) $ (89,927)
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, 2019
102,173  $ 109  $ 398,882  $ (1,428) $ (301,109) $ (11,905) $ 84,549 
Common stock offering, net of issuance costs of $530
7,000  146,463  —  —  —  146,470 
Exercise of stock options 3,308  14,852  —  —  —  14,855 
Vested restricted stock units converted to common shares 2,946  (3) —  —  —  — 
Issuance of restricted stock 11  —  —  —  —  —  — 
Issuance of common stock under employee stock purchase plan 392  —  6,627  —  —  —  6,627 
Stock-based compensation —  —  69,187  —  —  —  69,187 
Other comprehensive income —  —  —  1,068  —  —  1,068 
Net loss —  —  —  —  (121,544) —  (121,544)
Balance, January 31, 2020
115,830  122  636,008  (360) (422,653) (11,905) 201,212 
Exercise of stock options 2,474  13,209  —  —  —  13,212 
Vested restricted stock units converted to common shares 3,135  (3) —  —  —  — 
Issuance of restricted stock 38  —  —  —  —  —  — 
Issuance of common stock under employee stock purchase plan 699  6,999  —  —  —  7,000 
Stock-based compensation —  —  55,200  —  —  —  55,200 
Other comprehensive income —  —  —  420  —  —  420 
Net loss —  —  —  —  (76,381) —  (76,381)
Balance, October 31, 2020
122,176  $ 129  $ 711,413  $ 60  $ (499,034) $ (11,905) $ 200,663 
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,
2020 2019
Operating activities:
Net loss
$ (76,381) $ (90,967)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
7,539  5,836 
Bad debt expense
2,376  297 
Stock-based compensation expense
53,889  50,917 
Amortization of operating lease right-of-use assets
9,367  8,039 
Other, net 589  (7)
Changes in operating assets and liabilities:
Accounts receivable
30,302  15,908 
Prepaid expenses and other current assets
(5,023) 888 
Costs to obtain revenue contracts
4,743  (6,196)
Other long term assets
(1,350) (1,681)
Accounts payable, accrued expenses and other current liabilities
(7,192) 3,161 
Unearned revenue
(49,592) (27,531)
Operating lease liabilities
2,526  (1,576)
Other long term liabilities
4,485  478 
Net cash used in operating activities
(23,722) (42,434)
Investing activities:
Maturities of marketable securities
—  51,197 
Capital expenditures
(53,946) (7,347)
Net cash (used in) provided by investing activities
(53,946) 43,850 
Financing activities:
Proceeds from common stock offering, net of underwriting discounts and commissions
—  147,000 
Payments of common stock deferred offering costs
—  (530)
Proceeds from exercise of stock options
13,145  12,513 
Payments of deferred financing costs
(869) (260)
Proceeds, net from employee stock purchase plan withholdings
4,811  5,078 
Net cash provided by financing activities
17,087  163,801 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
1,401  (118)
Net (decrease) increase in cash, cash equivalents and restricted cash
(59,180) 165,099 
Cash, cash equivalents and restricted cash at beginning of period
268,176  91,755 
Cash, cash equivalents and restricted cash at end of period
$ 208,996  $ 256,854 
Supplemental reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:
(in thousands)
October 31, 2020 October 31, 2019
Cash and cash equivalents
$ 208,996  $ 244,754 
Restricted cash
—  12,100 
Total cash, cash equivalents and restricted cash
$ 208,996  $ 256,854 
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"), a search experience cloud company, puts businesses in control of their facts online by delivering their official answers. The Yext platform lets businesses structure the facts about their brands in a database called a Knowledge Graph. The Yext platform is built to leverage the structured data stored in the Knowledge Graph to power direct answers on a business' own website, as well as across more than 175 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 2021, for example, are to the fiscal year ending January 31, 2021.
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, 2020, filed with the SEC on March 20, 2020 (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, 2020, 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, 2020 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending January 31, 2021, or any other period.
Except as described elsewhere in this Note 2 under the heading “Recent Accounting Pronouncements”, there have been no material changes to the Company's significant accounting policies as described in the Form 10-K.
Certain prior period amounts have been reclassified to conform to the current period presentation.
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 ("SSP") of performance obligations, the incremental borrowing rate associated with lease liabilities, the useful life of capitalized costs to obtain customer contracts, income taxes, and the fair value of 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 in 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 in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.
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Concentration of Credit Risk
Certain financial instruments that could be exposed to a concentration of credit risk may include cash and cash equivalents, marketable securities 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, 2020 and January 31, 2020, 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, 2020 and 2019, respectively.
Recent Accounting Pronouncements
Adoption of New Accounting Standard - ASU 2016-13
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13,  "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments." The new model uses a forward-looking expected loss method, which requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information, and requires expected credit losses to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. The Company adopted this standard on February 1, 2020, and the application of the new forward-looking expected loss model to the allowance for doubtful accounts did not have a material effect on its condensed consolidated financial statements.
New Accounting Standard To Be Adopted - ASU 2019-12
In December 2019, the FASB issued ASU 2019-12 "Simplifying the Accounting for Income Taxes", which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification ("ASC") Topic 740, "Income Taxes," and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company plans to adopt this standard on February 1, 2021 and does not currently expect the adoption to have a material impact on the Company's condensed 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 7% and 5% of the Company's total revenue for the nine months ended October 31, 2020 and 2019, 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) 2020 2019 2020 2019
North America $ 71,159  $ 62,815  $ 211,557  $ 179,268 
International 17,902  13,555  50,910  38,183 
Total revenue $ 89,061  $ 76,370  $ 262,467  $ 217,451 
North America revenue is predominantly attributable to the United States, but also includes Canada. International revenue is predominantly attributable to European countries, but also includes Japan. The Company's revenue attributable to the United States represented 80% and 82% of total revenue for the nine months ended October 31, 2020 and 2019, respectively. Its revenue attributable to Switzerland, which serves as one of the Company's contracting entities for Europe, represented 16% and 13% of total revenue for the nine months ended October 31, 2020 and 2019, respectively. No other individual country represented more than 10% of total revenue for the nine months ended October 31, 2020 and 2019, respectively.
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, 2020, unearned revenue, current was $128.7 million, while unearned revenue, non-current, which is included within other long term liabilities on the Company's condensed consolidated balance sheet, was $0.2 million. Revenue recognized of $157.9 million during the nine months ended October 31, 2020 was included in unearned revenue at the beginning of the period.
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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, 2020 and January 31, 2020, customer deposits of $0.5 million and $0.9 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, 2020, the Company had $285.4 million of remaining performance obligations, of which $265.3 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, 2020, the Company had $328.1 million of remaining performance obligations.
4. 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:
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.
As of October 31, 2020 the Company had $148.8 million of money market funds included in cash and cash equivalents. As of January 31, 2020, the Company had $190.8 million of money market funds included in cash and cash equivalents and $12.1 million of money market funds included in restricted cash on the Company's condensed consolidated balance sheet. These assets were valued using quoted market prices and accordingly were classified as Level 1.
5. Goodwill and Intangible Assets
Goodwill
As of October 31, 2020 and January 31, 2020, the Company had goodwill of $4.7 million and $4.5 million, respectively.
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 during the nine months ended October 31, 2020 and 2019 that would more likely than not reduce the fair value of the Company's reporting unit below its carrying amount. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.
Intangible Assets
As of October 31, 2020 and January 31, 2020, the Company had intangible assets, net of $0.9 million and $1.3 million, respectively. The Company's intangible assets are amortized on a straight-line basis over their estimated useful lives. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company has no indefinite-lived intangible assets.
The Company determined that no events occurred or circumstances changed during the nine months ended October 31, 2020 and 2019 that would indicate that its intangible assets with finite lives may not be recoverable. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.
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Amortization expense related to intangible assets totaled $0.1 million and $0.4 million for the three and nine months ended October 31, 2020, respectively and $0.1 million and $0.4 million for the three and nine months ended October 31, 2019, respectively.
6. 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, 2020 January 31, 2020
Computer software $ 10,719  $ 10,099 
Office equipment 12,227  9,966 
Furniture and fixtures 2,752  1,347 
Leasehold improvements 20,892  15,170 
Construction in progress 39,359  13,812 
Software in progress 3,845  961 
Total property and equipment, gross 89,794  51,355 
Less: accumulated depreciation (17,846) (25,155)
Total property and equipment, net $ 71,948  $ 26,200 
Construction in progress consists primarily of leasehold improvements related to operating lease arrangements for office space primarily associated with the Company's new corporate headquarters in New York, NY. Software in progress consists of costs incurred in connection with additional functionality to the Yext platform.
As of October 31, 2020 and January 31, 2020, the Company's property and equipment, net attributable to the United States was 86% and 88%, respectively. No other individual country represented more than 10% of the total property and equipment, net as of those periods. Depreciation expense was $2.2 million and $7.1 million for the three and nine months ended October 31, 2020, respectively and $1.9 million and $5.4 million for the three and nine months ended October 31, 2019, respectively. In May 2020, the Company entered into a Surrender Agreement (the "Surrender Agreement") of its lease arrangement for its prior corporate headquarters in New York, NY. In July 2020, the Company permanently exited the facility and accordingly revised the estimated useful lives of the associated property and equipment, resulting in $0.8 million of additional depreciation expense in the nine months ended October 31, 2020. Pursuant to the Surrender Agreement, the Company's lease obligations continued through August 31, 2020. See Note 12 "Leases" for further information.
7. Accounts Payable, Accrued Expenses and Other Current Liabilities
        Accounts payable, accrued expenses and other current liabilities consisted of the following:
(in thousands) October 31, 2020 January 31, 2020
Accounts payable (1)
$ 10,796  $ 9,599 
Accrued employee compensation 16,942  20,622 
Accrued Knowledge Network application provider fees 2,428  5,561 
Accrued professional services and associated costs 2,180  3,077 
Accrued employee stock purchase plan withholdings liability 1,089  3,277 
Other current liabilities (2)
14,198  17,346 
Total accounts payable, accrued expenses and other current liabilities $ 47,633  $ 59,482 
(1) - As of October 31, 2020 and January 31, 2020, accounts payable includes capital expenditures of $2.8 million and $2.2 million, respectively.
(2) - As of October 31, 2020 and January 31, 2020, other current liabilities include capital expenditures of $3.1 million and $7.0 million, respectively.
8. 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
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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, 2020, the number of shares of common stock available for issuance under the 2016 Plan was automatically increased according to its terms by 4,633,215 shares. In addition, the shares reserved for issuance under the 2016 Plan also include shares returned to the 2008 Plan as the result of expiration or termination of options or other awards. As of October 31, 2020, the number of shares available for future award under the 2016 Plan is 1,859,853.
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, 2020
12,371,254  $ 7.05  5.53 $ 98,028 
Granted —  $ — 
Exercised (2,474,292) $ 5.34 
Forfeited or canceled (432,102) $ 6.83 
Balance, October 31, 2020
9,464,860  $ 7.51  5.17 $ 85,827 
Vested and expected to vest 9,339,422  $ 7.46  5.15 $ 85,140 
Exercisable at October 31, 2020
8,766,402  $ 7.23  5.03 $ 81,950 
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, 2020. 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 $25.2 million and $38.8 million for the nine months ended October 31, 2020 and 2019, 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, 2020
9,910,729  $ 17.44 
Granted 4,811,799  $ 15.39 
Vested and converted to shares (3,145,740) $ 16.90 
Forfeited or canceled (1,169,878) $ 17.32 
Balance as of October 31, 2020
10,406,910  $ 16.68 
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, 2020, the number of shares of
13


common stock available for issuance under the ESPP was automatically increased according to its terms by 1,158,304 shares. As of October 31, 2020, a total of 2,834,557 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 16, 2020, 373,891 shares of common stock were purchased under the ESPP at a purchase price of $10.01 per share for total proceeds of $3.7 million. In connection with the offering period which ended on September 15, 2020, 324,141 shares of common stock were purchased under the ESPP at a purchase price of $10.01 per share for total proceeds of $3.2 million.
A new offering period began on September 15, 2020 and will end on March 15, 2021. As of October 31, 2020, 331,129 shares are estimated to be purchased at the end of the offering period and $1.1 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.
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,
2020 2019 2020 2019
Expected life (years) 0.50 0.50 0.50 0.50
Expected volatility 65.48% 42.41%
51.44% - 65.48%
42.41% - 60.86%
Dividend yield
Risk-free rate 0.12% 1.93%
0.12% - 0.29%
1.93% - 2.52%
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, 2020, the Company recorded stock-based compensation expense associated with the ESPP of $0.7 million and $1.9 million, respectively and $0.7 million and $2.0 million for the three and nine months ended October 31, 2019, respectively. As of October 31, 2020, total unrecognized compensation cost related to ESPP was $1.3 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.
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 on a straight-line basis, net of estimated forfeitures, over the requisite service period in the condensed consolidated statements of operations and comprehensive loss.
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) 2020 2019 2020 2019
Cost of revenue $ 1,513  $ 1,176  $ 4,053  $ 2,982 
Sales and marketing 9,410  8,604  25,151  23,673 
Research and development 4,228  3,630  12,104  9,260 
General and administrative 4,136  7,682  12,581  15,002 
Total stock-based compensation expense $ 19,287  $ 21,092  $ 53,889  $ 50,917 
General and administrative stock-based compensation expense for the three and nine months ended October 31, 2019, included a $3.6 million one-time RSU cancellation-related expense.
As of October 31, 2020, there was approximately $163.1 million of total unrecognized compensation cost related to unvested stock-based awards. This unrecognized compensation cost is expected to be recognized over an estimated remaining weighted-average vesting period of approximately 2.85 years. During the three and nine months ended October 31, 2020, the Company capitalized $0.5
14


million and $1.3 million, respectively of stock-based compensation related to software development of additional functionality to the Yext platform, and $0.5 million and $1.2 million for the three and nine months ended October 31, 2019.
9. Equity
The following table summarizes the changes in stockholders' equity during the nine months ended October 31, 2020:
Accumulated
Additional Other Total
Common Stock Paid-In Comprehensive Accumulated Treasury Stockholders’
(in thousands) Shares Amount Capital Income (Loss) Deficit Stock Equity
Balance, January 31, 2020
115,830  $ 122  $ 636,008  $ (360) $ (422,653) $ (11,905) $ 201,212 
Exercise of stock options 391  1,895  —  —  —  1,896 
Vested restricted stock units converted to common shares 903  (1) —  —  —  — 
Issuance of restricted stock 26  —  —  —  —  —  — 
Issuance of common stock under employee stock purchase plan 374  —  3,743  —  —  —  3,743 
Stock-based compensation —  —  17,617  —  —  —  17,617 
Other comprehensive loss —  —  —  (1,333) —  —  (1,333)
Net loss —  —  —  —  (29,224) —  (29,224)
Balance, April 30, 2020
117,524  124  659,262  (1,693) (451,877) (11,905) 193,911 
Exercise of stock options 935  4,750  —  —  —  4,751 
Vested restricted stock units converted to common shares 1,041  (1) —  —  —  — 
Issuance of restricted stock 12  —  —  —  —  —  — 
Stock-based compensation —  —  17,752  —  —  —  17,752 
Other comprehensive income —  —  —  2,250  —  —  2,250 
Net loss —  —  —  —  (25,116) —  (25,116)
Balance, July 31, 2020
119,512  126  681,763  557  (476,993) (11,905) 193,548 
Exercise of stock options 1,148  6,564  —  —  —  6,565 
Vested restricted stock units converted to common shares 1,191  (1) —  —  —  — 
Issuance of common stock under employee stock purchase plans 325  3,256  —  —  —  3,257 
Stock-based compensation —  —  19,831  —  —  —  19,831 
Other comprehensive loss —  —  —  (497) —  —  (497)
Net loss —  —  —  —  (22,041) —  (22,041)
Balance, October 31, 2020
122,176  $ 129  $ 711,413  $ 60  $ (499,034) $ (11,905) $ 200,663 
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The following table summarizes the changes in stockholders' equity during the nine months ended October 31, 2019:
Accumulated
Additional Other Total
Common Stock Paid-In Comprehensive Accumulated Treasury Stockholders’
(in thousands) Shares Amount Capital Loss Deficit Stock Equity
Balance, January 31, 2019
102,173  $ 109  $ 398,882  $ (1,428) $ (301,109) $ (11,905) $ 84,549 
Common stock offering, net of issuance costs of $530
7,000  146,463  —  —  —  146,470 
Exercise of stock options 1,096  4,995  —  —  —  4,996 
Vested restricted stock units converted to common shares 557  —  —  —  —  —  — 
Issuance of restricted stock —  —  —  —  —  — 
Issuance of common stock under employee stock purchase plan 170  —  3,283  —  —  —  3,283 
Stock-based compensation —  —  13,472  —  —  —  13,472 
Other comprehensive income —  —  —  349  —  —  349 
Net loss —  —  —  —  (18,959) —  (18,959)
Balance, April 30, 2019
111,000  117  567,095  (1,079) (320,068) (11,905) 234,160 
Exercise of stock options 830  4,136  —  —  —  4,137 
Vested restricted stock units converted to common shares 845  (1) —  —  —  — 
Issuance of restricted stock —  —  —  —  —  — 
Stock-based compensation —  —  17,025  —  —  —  17,025 
Other comprehensive loss —  —  —  (892) —  —  (892)
Net loss —  —  —  —  (29,291) —  (29,291)
Balance, July 31, 2019
112,682  119  588,255  (1,971) (349,359) (11,905) 225,139 
Exercise of stock options 647  —  3,406  —  —  —  3,406 
Vested restricted stock units converted to common shares 820  (1) —  —  —  — 
Issuance of common stock under employee stock purchase plan 222  —  3,344  —  —  —  3,344 
Stock-based compensation —  —  21,601  —  —  —  21,601 
Other comprehensive income —  —  —  1,583  —  —  1,583 
Net loss —  —  —  —  (42,717) —  (42,717)
Balance, October 31, 2019
114,371  $ 120  $ 616,605  $ (388) $ (392,076) $ (11,905) $ 212,356 
Common Stock Offering
On March 20, 2019, the Company closed a common stock offering, in which it issued and sold 7,000,000 shares of common stock, inclusive of the fully exercised underwriters’ option to purchase additional shares. The price per share to the public was $21.50. The Company received aggregate proceeds of $147.0 million from this offering, net of underwriters’ discounts and commissions, before deducting offering costs of approximately $0.5 million, which were recorded in additional paid in capital in its condensed consolidated statements of stockholders' equity.
Preferred Stock
Effective April 2017, the Company’s Board of Directors is authorized to issue up to 50,000,000 shares of preferred stock, $0.001 par value, in one or more series without stockholder approval. The Company's Board of Directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. The issuance of preferred stock could have the effect of restricting dividends on the Company’s common stock, diluting the voting power of its common stock, impairing the liquidation rights of its common stock, or delaying or preventing changes in control or management of the Company. As of October 31, 2020 and January 31, 2020, no shares of preferred stock were issued or outstanding.
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Common Stock
        As of October 31, 2020 and January 31, 2020, the Company had authorized 500,000,000 shares of voting $0.001 par value common stock. Each holder of the Company's common stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative rights. Subject to any preferential rights of any outstanding preferred stock, holders of the Company's common stock are entitled to receive ratably the dividends, if any, as may be declared from time to time by the Company's Board of Directors out of legally available funds. If there is a liquidation, dissolution or winding up of the Company, holders of the Company's common stock would be entitled to share in the Company's assets remaining after the payment of liabilities and any preferential rights of any outstanding preferred stock.
        Holders of the Company's common stock have no preemptive or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of the Company's common stock will be fully paid and non-assessable. The rights, preferences and privileges of the holders of the Company's common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which the Company may designate and issue in the future.
Treasury Stock
 As of October 31, 2020 and January 31, 2020, the Company had 6,505,334 shares of treasury stock which are carried at its cost basis of $11.9 million on the Company's condensed consolidated balance sheets.
10. Debt
On March 16, 2016, the Company entered into a Loan and Security agreement with Silicon Valley Bank that provides for a $15.0 million revolving credit line ("Revolving Line") and a $7.0 million Letter of Credit facility (together with the Revolving Line, the "Credit Agreement"). In March 2018, the Credit Agreement was amended to extend the maturity date to March 16, 2020. On March 11, 2020, the Company replaced its existing Credit Agreement and entered into a new credit agreement with Silicon Valley Bank (the “March 2020 Credit Agreement”). No significant debt issuance costs were incurred in association with the March 2020 Credit Agreement.
The March 2020 Credit Agreement provides for a senior secured revolving loan facility of up to $50.0 million that matures three years after the effective date, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The three-year revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.
Under the March 2020 Credit Agreement, loans bear interest, at the Company's option, at an annual rate based on LIBOR or a base rate. Loans based on LIBOR shall bear interest at a rate between LIBOR plus 2.50% and LIBOR plus 3.00%, depending on the Company's average daily usage of the revolving loan facility. Loans based on the base rate shall bear interest at a rate between the base rate minus 0.50% and the base rate plus 0.00%, depending on the Company's average daily usage of the revolving loan facility.
The obligations under the March 2020 Credit Agreement are secured by a lien on substantially all of the tangible and intangible property of the Company and by a pledge of all of the equity interests of the Company's material direct and indirect domestic subsidiaries and 66% of each class of capital stock of any material first-tier foreign subsidiaries, subject to limited exceptions.
The March 2020 Credit Agreement contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require the Company to maintain the year-over-year growth rate of its ordinary course recurring revenue for a trailing four fiscal quarter period above specified rates when certain liquidity thresholds are not met and to maintain a consolidated quick ratio of at least 1.50 to 1.00 tested on a monthly basis.
As of January 31, 2020, the Company had back-to-back standby letters of credit for $12.1 million, which were fully secured by a $12.1 million cash deposit and classified as restricted cash on the Company's condensed consolidated balance sheet. In connection with the March 2020 Credit Agreement, the $12.1 million cash deposit was released and is no longer classified as restricted cash on the Company's condensed consolidated balance sheet as of October 31, 2020.
        As of October 31, 2020, the Company was in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $35.7 million available and $14.3 million in letters of credit allocated as security in connection with office space.
11. Income Taxes
The Company calculates its year-to-date (provision for) benefit from income taxes by applying the estimated annual effective tax rate ("AETR") to year-to-date income or loss from operations before income taxes and adjusts for discrete tax items recorded in the period. During the three and nine months ended October 31, 2020, the Company recorded a (provision for) benefit from income taxes of $(0.1) million and $(0.7) million, respectively. During the three and nine months ended October 31, 2019, the Company recorded a (provision for) benefit from income taxes of $(0.3) million and $(0.7) million, respectively.
The Company's effective tax rate generally differs from the U.S. federal statutory tax rate primarily due to a full valuation allowance related to the Company's net deferred tax assets in the U.S. and in certain foreign jurisdictions, partially offset by the
17


foreign tax rate differential on non-U.S. income. The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance on a jurisdictional basis if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. To the extent sufficient positive evidence becomes available, a portion of the valuation allowance against certain net deferred tax assets could be released and would result in a non-cash income tax benefit in the period of release.
12. Leases
The Company's operating lease arrangements are principally for office space. As of October 31, 2020, the Company had $6.8 million of operating lease liabilities, current, $123.7 million of operating lease liabilities, non-current, $106.9 million of operating lease right-of-use assets, and no financing leases, on its condensed consolidated balance sheet. The operating lease arrangements included in the measurement of lease liabilities do not include short-term leases, and had a weighted-average remaining lease term of 9.7 years and a weighted-average discount rate of 5.7%, as of October 31, 2020. During the nine months ended October 31, 2020, the Company paid $7.7 million for amounts included in the measurement of lease liabilities and obtained $7.2 million of operating lease right-of-use assets in exchange for lease obligations.
In May 2020, the Company entered into a Surrender Agreement (the "Surrender Agreement") of its lease arrangement for its prior corporate headquarters in New York, NY. The previous lease arrangement was scheduled to expire in December 2020. Pursuant to the Surrender Agreement, the Company's lease obligations continued through August 31, 2020.
During the nine months ended October 31, 2020 and 2019, the Company recognized $18.6 million and $15.6 million, of lease expense, respectively, which consisted of the following:
Nine months ended October 31,
(in thousands) 2020 2019
Operating lease expense $ 15,318  $ 11,993 
Short-term lease expense 904  1,729 
Variable lease expense 2,425  1,845 
Total lease expense $ 18,647  $ 15,567 
Operating lease expense is recognized on a straight-line basis over the term of the arrangement beginning on the lease commencement date for lease arrangements that have an initial term greater than twelve months and therefore are recorded on the balance sheet. For the nine months ended October 31, 2020, operating lease expense includes lease expense related to the Company's lease arrangement associated with its new corporate headquarters in New York, NY, which commenced in May 2019. Short-term lease expense is recognized on a straight-line basis over the lease term for lease arrangements that have an initial term of 12 months or less and therefore are not recorded on the balance sheet. Variable lease expense is recognized as incurred and consists of real estate taxes and utilities, among other office space related expenses.
13. Commitments and Contingencies
Contractual Obligations
        The Company is obligated to make payments under certain non-cancelable contractual obligations in the normal course of business. The Company's contractual obligations primarily relate to its operating lease arrangements for office space. Its other contractual obligations include contracts with its Knowledge Network application providers, which generally have a term of one year, and its software vendors, among others. These obligations represent minimum contractual payments, or the Company's best estimate for variable elements based on historical payments. The Company's contractual obligations have various expiry dates between fiscal years 2021 and 2035.
        As of October 31, 2020, the Company's contractual obligations are as follows (in thousands):
Fiscal year ending January 31: Operating Leases Other
2021 (remainder of fiscal year)
$ 4,034  $ 12,391 
2022 19,083  12,107 
2023 19,058  5,595 
2024 18,784  1,862 
2025 18,263  1,604 
2026 and thereafter 111,241  3,132 
Total $ 190,463  $ 36,691 
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Performance and Payment Bond
The Company's operating lease arrangement associated with its new corporate headquarters in New York, NY requires performance and payment bonds to secure the completion of certain potential construction work, when a reasonable estimate of such work is available. In connection with these bonds, as of October 31, 2020, the Company paid $0.9 million in issuance costs which are recognized as operating expense over the estimated construction period in the Company's condensed consolidated statement of operations.
Legal Proceedings
       The Company is and may be involved in various legal proceedings arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, currently, in the opinion of the Company, the likelihood of any material adverse impact on the Company's results of operations, cash flows or the Company's financial position for any such litigation or claims is deemed to be remote. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors.
Warranties and Indemnifications
The Yext platform is in some cases warranted to perform in a manner consistent with general industry standards that are reasonably applicable and materially in accordance with the Company's product specifications.
The Company's arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third-party's intellectual property rights and/or if the Company breaches its contractual agreements with a customer or in instances of negligence, fraud or willful misconduct by the Company. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such obligations in the accompanying condensed consolidated financial statements.
The Company has also agreed to indemnify certain of its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person's service as a director or officer, including any action by the Company, arising out of that person's services as the Company's director or officer or that person's services provided to any other company or enterprise at the Company's request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions.
14. Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders:
Three months ended October 31, Nine months ended October 31,
(in thousands, except share and per share data) 2020 2019 2020 2019
Numerator:
     Net loss attributable to common stockholders $ (22,041) $ (42,717) $ (76,381) $ (90,967)
Denominator:
     Weighted-average common shares outstanding 120,721,555 113,464,608 118,594,452 110,610,473
Net loss per share attributable to common stockholders, basic and diluted $ (0.18) $ (0.38) $ (0.64) $ (0.82)
        Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Unvested restricted stock and restricted stock units are excluded from the denominator of basic net loss per share. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares plus common equivalent shares for the period, including any dilutive effect from such shares.
        Since the Company was in a net loss position for all periods presented, net loss per share attributable to common stockholders was the same on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been anti-dilutive. Anti-dilutive common equivalent shares were as follows:
As of October 31,
2020 2019
Options to purchase common stock 9,464,860  13,209,606 
Restricted stock and restricted stock units 10,406,910  9,821,715 
Shares estimated to be purchased under ESPP 331,129  284,942 
Total anti-dilutive common equivalent shares 20,202,899  23,316,263 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
    The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on March 20, 2020. As discussed in the section titled "Special Note Regarding Forward Looking Statements," the following discussion and analysis contains forward looking statements that involve risks and uncertainties, including uncertainty resulting from the ongoing COVID-19 pandemic, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the section titled "Risk Factors" under Part II, Item 1A in this Quarterly Report on Form 10-Q.
Overview
Yext, a search experience cloud company, puts businesses in control of their facts online by delivering their official answers. Our platform lets businesses structure the facts about their brands in a database called a Knowledge Graph. Our platform is built to leverage the structured data stored in the Knowledge Graph to power direct answers on a business's own website, as well as across more than 175 service and application providers, which we refer to as our 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 our key features, including Listings, Pages, and Answers, along with its other features and capabilities.
We sell our platform throughout the world and intend to continue to expand our international sales efforts. We sell to customers of all sizes, through direct sales efforts to our customers, including third-party reseller customers. In transactions with resellers, we are only party to the transaction with the reseller and are not a party to the reseller's transaction with its customer.
Revenue is a function of the number of customers, the number of licenses with each customer, the package to which each customer subscribes, the price of the package and renewal rates. We offer subscriptions in a discrete range of packages, with pricing based on specified feature sets and the number of licenses managed by the customer as well as on a capacity-basis.
Fiscal Year
Our fiscal year ends on January 31st. References to fiscal 2021, for example, are to the fiscal year ending January 31, 2021.
COVID-19 Update
In March 2020, the World Health Organization ("WHO") declared the coronavirus disease ("COVID-19") as a pandemic. The COVID-19 pandemic has disrupted business operations for us and our customers, suppliers, and other parties with whom we do business and such disruptions are expected to continue for an indefinite period of time. In an effort to control the spread of COVID-19, governments and municipalities around the world instituted restrictive measures, including orders to shelter-in-place, travel restrictions, and mandated business closures.
As a result of the COVID-19 pandemic, we temporarily closed our offices requiring all of our employees globally to work remotely. We restricted non-essential business travel, and canceled in-person marketing events, including our annual industry and customer event, ONWARD20, which had been scheduled to occur in November 2020 in New York City. We continue to monitor regional developments relating to the COVID-19 pandemic to inform decisions on phased office re-openings and lifting of travel restrictions. The uncertain duration of these measures have had and may continue to have negative effects on our sales efforts and revenue growth rates.
Many of our customers and potential customers needs have been impacted by the COVID-19 pandemic, and we are continuing to adapt to those needs. In response to the COVID-19 pandemic, some existing and potential customers, in particular customers in industries highly impacted by the pandemic such as retail and food services as well as certain geographies such as Europe, have, and we expect other customers may, reduce, suspend or delay technology spending; request to renegotiate contracts to obtain concessions such as, extended billing and payment terms; shorten the duration of contracts; or elect not to renew their subscriptions.
Despite the economic challenges brought on by the COVID-19 pandemic, we are committed to our business, the strength of our platform, and our ability to continue to execute on our strategy. Earlier this year, we announced collaborations with the WHO and other government agencies to launch comprehensive information hubs powered by Yext Answers. We are offering Yext Answers as a 90-day free trial and announced a global technology partnership with Adobe where Adobe content management system clients can choose to upgrade their search experience with Yext Answers. We also expanded Yext Answers into additional languages, including French, German, Italian, Spanish, and Japanese, and launched the Yext Hitchhiker program to help brands around the world provide enhanced search experiences to consumers.
The ultimate extent of the impact of the pandemic on our business, financial condition and results of operations will depend on future developments, which continue to be highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic and the actions taken to contain and address its impact, among others. However, because we generally recognize revenue from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not
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be fully reflected in our results of operations and overall financial performance until future periods. See Part II Item 1A “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic on our business.
Components of Results of Operations
Revenue
We derive our revenue primarily from subscription and associated support to our Yext platform. Our contracts are typically one year in length, but may be up to three years or longer in length. Revenue is a function of the number of customers, the number of licenses with each customer, the package to which each customer subscribes, the price of the package and renewal rates. Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date our platform is made available to customers. At the beginning of each subscription term we invoice our customers, typically in annual installments, but also monthly, quarterly, and semi-annually. Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and unearned revenue. Unearned revenue is subsequently recognized as revenue when transfer of control to a customer has occurred.
Cost of Revenue
Cost of revenue consists primarily of employee-related costs, including personnel-related costs, which mainly consist of salaries and wages, and stock-based compensation expense. Cost of revenue also includes fees associated with our Knowledge Network application provider arrangements, the nature of which may be unpaid, fixed, or variable, and are unpaid with many of our larger providers. In addition, cost of revenue includes the costs associated with our data centers, as well as depreciation expense, including with respect to certain capitalized software development costs incurred in connection with additional functionality to our platform. Cost of revenue also includes operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount.
Operating Expenses
Sales and marketing expenses. Sales and marketing expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense. Personnel-related costs mainly consist of salaries and wages and costs of obtaining revenue contracts. Sales and marketing expenses also include costs related to advertising and conferences and brand awareness events. In addition, sales and marketing expenses include operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount. 
Research and development expenses. Research and development expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense. Personnel-related costs mainly consist of salaries and wages. Capitalized software development costs related to additional functionality to our platform are excluded from research and development expenses as they are capitalized as a component of property and equipment, net and depreciated to cost of revenue over the term of their useful life. Research and development expenses also include operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount.
General and administrative expenses. General and administrative expenses consist primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense for our finance and accounting, human resources, information technology and legal support departments. Personnel-related costs mainly consist of salaries and wages. General and administrative expenses also include operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount, and other professional related costs.
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Results of Operations
The following table sets forth selected condensed consolidated statement of operations data for each of the periods indicated:
Three months ended October 31, Nine months ended October 31,
(in thousands) 2020 2019 2020 2019
Revenue
$ 89,061  $ 76,370  $ 262,467  $ 217,451 
Cost of revenue(1)
21,639  20,366  64,807  56,108 
 Gross profit
67,422  56,004  197,660  161,343 
Operating expenses:
 Sales and marketing(1)
56,646  61,969  171,215  160,738 
 Research and development(1)
14,475  13,011  43,641  35,603 
 General and administrative(1)
18,061  23,857  57,993  57,392 
 Total operating expenses
89,182  98,837  272,849  253,733 
Loss from operations
(21,760) (42,833) (75,189) (92,390)
Interest income
1,129  524  3,412 
Interest expense
(184) (81) (475) (213)
Other expense, net
(38) (682) (545) (1,091)
Loss from operations before income taxes
(21,973) (42,467) (75,685) (90,282)
(Provision for) benefit from income taxes (68) (250) (696) (685)
Net loss
$ (22,041) $ (42,717) $ (76,381) $ (90,967)

(1)Amounts include stock-based compensation expense as follows:
Three months ended October 31, Nine months ended October 31,
(in thousands) 2020 2019 2020 2019
Cost of revenue
$ 1,513  $ 1,176  $ 4,053  $ 2,982 
Sales and marketing
9,410  8,604  25,151  23,673 
Research and development
4,228  3,630  12,104  9,260 
General and administrative 4,136  7,682  12,581  15,002 
Total stock-based compensation expense
$ 19,287  $ 21,092  $ 53,889  $ 50,917 
The following table sets forth selected condensed consolidated statements of operations data for each of the periods indicated as a percentage of total revenue: 
Three months ended October 31, Nine months ended October 31,
2020 2019 2020 2019
Revenue
100  % 100  % 100  % 100  %
Cost of revenue
24  27  25  26 
 Gross profit
76  73  75  74 
Operating expenses:
 Sales and marketing
64  81  65  74 
 Research and development
16  17  17  16 
 General and administrative
20  31  22  26 
 Total operating expenses
100  129  104  116 
Loss from operations
(24) (56) (29) (42)
Interest income
—  — 
Interest expense
(1) —  —  — 
Other expense, net
—  (1) —  (1)
Loss from operations before income taxes
(25) (56) (29) (42)
(Provision for) benefit from income taxes —  —  —  — 
Net loss
(25) % (56) % (29) % (42) %
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Three Months Ended October 31, 2020 Compared to Three Months Ended October 31, 2019
Revenue and Cost of Revenue
Three months ended October 31, Variance
(in thousands) 2020 2019 Dollars Percent
 Revenue
$ 89,061  $ 76,370  $ 12,691  17  %
 Cost of revenue
21,639  20,366  $ 1,273  %
 Gross profit
$ 67,422  $ 56,004  $ 11,418  20  %
 Gross margin
75.7  % 73.3  %
Total revenue was $89.1 million for the three months ended October 31, 2020, compared to $76.4 million for the three months ended October 31, 2019, an increase of $12.7 million or 17%. The increase in revenue was primarily driven by new customer subscriptions to our platform. Revenue from our enterprise and mid-size customers, which include third-party reseller customers, grew 18% from $73.3 million to $86.5 million, and excludes revenue from small business customers, which by their nature have inherently high turnover.
Cost of revenue was $21.6 million for the three months ended October 31, 2020, compared to $20.4 million for the three months ended October 31, 2019, an increase of $1.3 million or 6%. The increase was primarily due to a $0.9 million increase in costs associated with our data centers, while to a lesser extent increases including in software and stock-based compensation were largely offset by decreases in personnel-related costs and Knowledge Network application provider fees.
Gross margin was 75.7% for the three months ended October 31, 2020, compared to 73.3% for the three months ended October 31, 2019 as reflected in the discussion above.
Operating Expenses
Three months ended October 31, Variance
(in thousands) 2020 2019 Dollars Percent
 Sales and marketing $ 56,646  $ 61,969  $ (5,323) (9) %
 Research and development $ 14,475  $ 13,011  $ 1,464  11  %
 General and administrative $ 18,061  $ 23,857  $ (5,796) (24) %
Sales and marketing expense was $56.6 million for the three months ended October 31, 2020, compared to $62.0 million for the three months ended October 31, 2019, a decrease of $5.3 million or 9%. Conferences and events decreased $4.3 million due to the COVID-19 pandemic: for example, ONWARD19, our annual industry and customer event, occurred during the three months ended October 31, 2019; ONWARD20 had been scheduled to occur in November 2020 but was canceled. Employee travel expenses decreased $3.6 million in light of the COVID-19 pandemic, and operating and short-term lease expenses decreased $0.6 million primarily due to the exit of our prior corporate headquarters in New York, NY. These decreases were partially offset by employee-related costs reflecting higher headcount, including a $3.1 million increase in personnel-related costs, which mainly consisted of salaries and wages and costs to obtain revenue contracts, as well as a $0.8 million increase in stock-based compensation expense.
Research and development expense was $14.5 million for the three months ended October 31, 2020, compared to $13.0 million for the three months ended October 31, 2019, an increase of $1.5 million or 11%. The increase was primarily due to employee-related costs reflecting higher headcount, including a $0.7 million increase in personnel-related costs, which mainly consisted of salaries and wages, and a $0.6 million increase in stock-based compensation expense.
General and administrative expense was $18.1 million for the three months ended October 31, 2020, compared to $23.9 million for the three months ended October 31, 2019, a decrease of $5.8 million or 24%. The decrease was driven by stock-based compensation expense, which was $4.1 million in the three months ended October 31, 2020, as compared to $7.7 million in the three months ended October 31, 2019 which had included a $3.6 million one-time RSU cancellation-related expense. In addition, expenses for personnel-related costs, as well as employee travel which was reduced in light of the COVID-19 pandemic, each decreased $0.4 million.
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Nine Months Ended October 31, 2020 Compared to Nine Months Ended October 31, 2019
Revenue and Cost of Revenue
Nine months ended October 31, Variance
(in thousands) 2020 2019 Dollars Percent
 Revenue
$ 262,467  $ 217,451  $ 45,016  21  %
 Cost of revenue
64,807  56,108  $ 8,699  16  %
 Gross profit
$ 197,660  $ 161,343  $ 36,317  23  %
 Gross margin
75.3  % 74.2  %
Total revenue was $262.5 million for the nine months ended October 31, 2020, compared to $217.5 million for the nine months ended October 31, 2019, an increase of $45.0 million or 21%. The increase in revenue was primarily driven by new customer subscriptions to our platform, and also included expanded subscriptions for existing customers. Revenue from our enterprise and mid-size customers, which include third-party reseller customers, grew 22% from $208.0 million to $254.6 million, and excludes revenue from small business customers, which by their nature have inherently high turnover.
Cost of revenue was $64.8 million for the nine months ended October 31, 2020, compared to $56.1 million for the nine months ended October 31, 2019, an increase of $8.7 million or 16%. This increase was primarily due to employee-related costs reflecting higher headcount, including a $2.4 million increase in personnel-related costs, which mainly consisted of salaries and wages, and a $1.1 million increase in stock-based compensation expense. In addition, there was a $2.2 million increase in costs associated with our data centers and a $0.6 million increase in depreciation expense.
Gross margin was 75.3% for the nine months ended October 31, 2020, compared to 74.2% for the nine months ended October 31, 2019 as reflected in the discussion above.
Operating Expenses
Nine months ended October 31, Variance
(in thousands) 2020 2019 Dollars Percent
 Sales and marketing $ 171,215  $ 160,738  $ 10,477  %
 Research and development $ 43,641  $ 35,603  $ 8,038  23  %
 General and administrative $ 57,993  $ 57,392  $ 601  %
Sales and marketing expense was $171.2 million for the nine months ended October 31, 2020, compared to $160.7 million for the nine months ended October 31, 2019, an increase of $10.5 million or 7%. The increase was primarily due to employee-related costs reflecting higher headcount, including a $21.1 million increase in personnel-related costs, which mainly consisted of salaries and wages and costs to obtain revenue contracts, as well as a $1.5 million increase in stock-based compensation expense. In addition, there was a $1.5 million increase in operating and short-term lease expenses, mainly as a result of our lease arrangement for our new corporate headquarters in New York, NY which commenced in May 2019. These increases were partially offset by an $8.1 million decrease in employee travel, as well as a $7.0 million decrease in conferences and events due to the COVID-19 pandemic: for example, ONWARD19, our annual industry and customer event, occurred during the nine months ended October 31, 2019; ONWARD20 had been scheduled to occur in November 2020 but was canceled.
Research and development expense was $43.6 million for the nine months ended October 31, 2020, compared to $35.6 million for the nine months ended October 31, 2019, an increase of $8.0 million or 23%. The increase was primarily due to employee-related costs reflecting higher headcount, including a $3.6 million increase in personnel-related costs, which mainly consisted of salaries and wages, as well as a $2.8 million increase in stock-based compensation expense. In addition, there was a $0.4 million increase in operating and short-term lease expenses, mainly as a result of our lease arrangement for our new corporate headquarters in New York, NY which commenced in May 2019.
General and administrative expense was $58.0 million for the nine months ended October 31, 2020, relatively consistent compared to $57.4 million for the nine months ended October 31, 2019. The allowance for doubtful accounts increased $2.1 million due to extended billing and payment terms with certain customers and considerations in light of the COVID-19 pandemic, and personnel-related costs increased $2.0 million, reflecting higher headcount. Stock-based compensation expense decreased $2.4 million to $12.6 million in the nine months ended October 31, 2020, as compared to $15.0 million in the nine months ended October 31, 2019 which had included a one-time RSU cancellation-related expense of $3.6 million. Employee travel expenses decreased $1.5 million in light of the COVID-19 pandemic.
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Liquidity and Capital Resources
As of October 31, 2020, our principal sources of liquidity were cash and cash equivalents of $209.0 million. We believe our existing cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months. Our cash flows, including net cash used in or provided by operating activities, may vary significantly from quarter to quarter, due to the timing of billings, cash collections, lease payments and capital expenditures, significant marketing events and related expenses, the potential effects of the COVID-19 pandemic, among other factors.
Our future capital requirements will depend on many factors, including those set forth under "Risk Factors." We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. We have and will continue to enter into new lease arrangements for new and expanded facilities, such as our lease arrangement for our new corporate headquarters in New York, NY, which commenced in May 2019. In connection with these arrangements, we expect our lease expenses and related capital expenditures to increase, which may limit our ability to take advantage of business opportunities or respond to changing business or market conditions. In addition, we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.
Credit Arrangements
On March 16, 2016, we entered into a Loan and Security agreement with Silicon Valley Bank ("SVB") that provides for a $15.0 million revolving credit line ("Revolving Line") and a $7.0 million Letter of Credit facility (together with the Revolving Line, the "Credit Agreement"). In March 2018, the Credit Agreement was amended to extend the maturity date to March 16, 2020. On March 11, 2020, we replaced our existing Credit Agreement and entered into a new credit agreement with Silicon Valley Bank (the “March 2020 Credit Agreement”). No significant debt issuance costs were incurred in association with the March 2020 Credit Agreement.
The March 2020 Credit Agreement provides for a senior secured revolving loan facility of up to $50.0 million that matures three years after the effective date, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate. The three-year revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.
Under the March 2020 Credit Agreement, loans bear interest, at our option, at an annual rate based on LIBOR or a base rate. Loans based on LIBOR shall bear interest at a rate between LIBOR plus 2.50% and LIBOR plus 3.00%, depending on our average daily usage of the revolving loan facility. Loans based on the base rate shall bear interest at a rate between the base rate minus 0.50% and the base rate plus 0.00%, depending on our average daily usage of the revolving loan facility. See Part II Item 1A “Risk Factors - Our new credit facility contains restrictive covenants that may limit our operating flexibility" for discussion of LIBOR being phased out.
The obligations under the March 2020 Credit Agreement are secured by a lien on substantially all of our tangible and intangible property and by a pledge of all of our equity interests of material direct and indirect domestic subsidiaries and 66% of each class of capital stock of any material first-tier foreign subsidiaries, subject to limited exceptions.
The March 2020 Credit Agreement contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require us to maintain the year-over-year growth rate of its ordinary course recurring revenue for a trailing four fiscal quarter period above specified rates when certain liquidity thresholds are not met and to maintain a consolidated quick ratio of at least 1.50 to 1.00 tested on a monthly basis.
As of January 31, 2020, we had back-to-back standby letters of credit for $12.1 million, which were fully secured by a $12.1 million cash deposit. The $12.1 million was classified as restricted cash on our condensed consolidated balance sheet. In connection with the March 2020 Credit Agreement, the $12.1 million cash deposit was released and is no longer classified as restricted cash on our condensed consolidated balance sheet as of October 31, 2020.
        As of October 31, 2020, we were in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $35.7 million available and $14.3 million in letters of credit allocated as security in connection with office space.
Cash Flows
The following table summarizes our cash flows:
Nine months ended October 31,
(in thousands) 2020 2019
 Net cash (used in) operating activities
$ (23,722) $ (42,434)
 Net cash (used in) provided by investing activities
$ (53,946) $ 43,850 
 Net cash provided by financing activities
$ 17,087  $ 163,801 
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Operating Activities
Net cash used in operating activities of $23.7 million for the nine months ended October 31, 2020 was primarily due to the net loss of $76.4 million, as well as changes in unearned revenue of $49.6 million, changes in accounts payable, accrued expenses and other current liabilities of $7.2 million and prepaid expenses and other current assets of $5.0 million respectively, associated with the timing of invoices and payments. This was partially offset by positive adjustments in reconciling our net loss to net cash used in operating activities related to changes in accounts receivable of $30.3 million, mainly due to timing of billing and cash collections during the period, as well as changes in costs to obtain revenue contracts of $4.7 million, other long term liabilities of $4.5 million, and operating lease liabilities of $2.5 million. Net cash used in operating activities was also partially offset by non-cash charges related to stock-based compensation expense of $53.9 million, amortization of operating lease right-of-use assets of $9.4 million, depreciation and amortization expense of $7.5 million, and bad debt expense of $2.4 million which includes an increase in the allowance for doubtful accounts relating to extended billing and payment terms with certain customers and considerations in light of impacts from the COVID-19 pandemic.
Net cash used in operating activities of $42.4 million for the nine months ended October 31, 2019 was primarily due to the net loss of $91.0 million, partially offset by positive reconciling adjustments related to non-cash charges of stock-based compensation expense of $50.9 million, amortization of operating lease right-of-use assets of $8.0 million, and depreciation and amortization of $5.8 million, as well as changes in unearned revenue of $27.5 million and costs to obtain revenue contracts of $6.2 million. These were partially offset by a change in accounts receivable of $15.9 million, mainly due to timing of billing and cash collections during the period.
Investing Activities
Net cash used in investing activities of $53.9 million for the nine months ended October 31, 2020 reflected capital expenditures primarily associated with our new corporate headquarters in New York, NY, and our office spaces in Rosslyn, VA and Tokyo, Japan, among others. We expect our investments in capital expenditures associated with our new office space will continue to drive our cash used in investing activities for the fiscal year ending January 31, 2021 as we work to complete the build-out of our new offices. We will continue to evaluate our real estate strategy in light of our evolving needs for office space.
Net cash provided by investing activities of $43.9 million for the nine months ended October 31, 2019 was related to maturities associated with marketable securities of $51.2 million, partially offset by capital expenditures of $7.3 million.
Financing Activities
Net cash provided by financing activities of $17.1 million for the nine months ended October 31, 2020 was primarily related to proceeds from exercise of stock options of $13.1 million and net proceeds from employee stock purchase plan withholdings of $4.8 million, partially offset by payments of deferred financing costs of $0.9 million.
Net cash provided by financing activities of $163.8 million for the nine months ended October 31, 2019 was primarily related to proceeds from our common stock offering of $147.0 million, net of underwriting discounts and commissions, as well as proceeds from exercises of stock options of $12.5 million, and net proceeds from employee stock purchase plan withholdings of $5.1 million.
Contractual Obligations
We are obligated to make payments under certain non-cancelable contractual obligations in the normal course of business. Our contractual obligations primarily relate to our operating lease arrangements for office space. Our other contractual obligations include contracts with our Knowledge Network application providers, which generally have a term of one year, and our software vendors, among others. These obligations represent minimum contractual payments, or our best estimate for variable elements based on historical payments. Our contractual obligations have various expiry dates between fiscal years 2021 and 2035.
        As of October 31, 2020, future minimum payments under these contractual obligations are as follows (in thousands):
Fiscal year ending January 31: Operating Leases Other
2021 (remainder of fiscal year)
$ 4,034  $ 12,391 
2022 19,083  12,107 
2023 19,058  5,595 
2024 18,784  1,862 
2025 18,263  1,604 
2026 and thereafter 111,241  3,132 
Total $ 190,463  $ 36,691 
See Note 13 "Commitments and Contingencies" to our condensed consolidated financial statements for further discussion on contractual obligations.
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Off-Balance Sheet Arrangements
We do not engage in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, as part of our ongoing business. Accordingly, our operating results, financial condition and cash flows are not subject to off-balance sheet risks.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
See Note 2 “Summary of Significant Accounting Policies,” to our condensed consolidated financial statements, included in this Quarterly Report on Form 10-Q, for further discussion on our accounting policies. There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Note 2 "Summary of Significant Accounting Policies- Recent Accounting Pronouncements," to the condensed consolidated financial statements for our discussion about adopted and pending recent accounting pronouncements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may affect our financial position due to adverse changes in financial market prices and rates. We are exposed to market risks related to foreign currency exchange rates, inflation and interest rates.
Foreign Currency Risk
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where the local currency is the functional currency, are translated from foreign currencies into U.S. dollars using month-end rates of exchange for assets and liabilities, and average rates for the period derived from month-end spot rates for revenue, costs and expenses. We record translation gains and losses in accumulated other comprehensive (loss) income as a component of stockholders' equity. We reflect net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of foreign currency exchange losses in other expense, net. Based on the size of our international operations and the amount of our expenses denominated in foreign currencies, we would not expect a 10% change in the value of the U.S. dollar from rates on October 31, 2020 to have a material effect on our financial position or results of operations. These exposures may change over time as business practices evolve and economic conditions change, including market impacts associated with COVID-19.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations, other than its impact on the general economy. Nonetheless, if our costs were to become subject to inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
Interest Rate Risk
As of October 31, 2020, we had cash and cash equivalents of $209.0 million. The primary objective of our investments is the preservation of capital to fulfill liquidity needs. We do not enter into investments for trading or speculative purposes.
We do not believe our cash equivalents have significant risk of default or illiquidity. While we believe our cash equivalents do not contain excessive risk, we cannot assure you that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits and are exposed to counterparty risk. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of October 31, 2020 due to the material weakness related to the processes to calculate, record and account for sales commissions as described in the Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended October 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are continuing to take steps to remediate the material weakness in our internal control over financial reporting as identified in the Annual Report on Form 10-K.
Limitations on the Effectiveness of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
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Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.


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PART II. OTHER INFORMATION
Item 1.    Legal Proceedings
We are not currently a party to any legal proceedings that are material to our business or financial condition. From time to time we may become party to various litigation matters and subject to claims that arise in the ordinary course of business.
Item 1A. Risk Factors
You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect our business. If any of the following risks occur, our business, financial condition, operating results and prospects could be materially harmed. In that event, the price of our common stock could decline, and you could lose part or all of your investment.
Risk Factor Summary
This risk factor summary contains a high-level summary of risks associated with our business, but does not address all of the risks that we face. Additional discussion of the risks summarized below, and other risks that we face, may be found immediately following this summary.
We have a history of losses and may not achieve profitability in the future.
The effects of the COVID-19 pandemic have had and are expected to continue to have an adverse effect on our business, operations and financial results as well as the business and operations of our customers and potential customers.
Because we recognize revenue from subscriptions for our platform over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results.
Our revenue growth rate in recent periods may not be indicative of our future performance.
We have a limited operating history and our business has evolved, which makes it difficult to predict our future operating results.
We have experienced rapid growth and significant changes to our organization and structure and may not be able to effectively manage such growth.
Failure to adequately maintain and scale our sales force will impede our growth.
We have expanded and intend to continue to expand our international operations, which exposes us to significant risks.
Our growth depends in part on the success of our strategic relationships with existing and prospective Knowledge Network application providers.
We do not have a long history with our pricing models and changes could adversely affect our operating results.
Our success depends on a fragmented internet environment for finding information, particularly information about businesses.
Our platform faces competition in the marketplace. If we are unable to compete effectively, our operating results could be adversely affected.
Business and professional service providers may not widely adopt our platform to manage their information or as an important part of their marketing strategy, which would limit our ability to grow our business.
If customers do not renew their subscriptions for our platform or if they reduce their subscriptions at the time of renewal, our revenue will decline and our business will suffer.
If we are unable to attract new customers, our revenue growth could be slower than we expect and our business may be harmed.
If we fail to integrate our platform with a variety of third-party technologies, our platform may become less marketable and less competitive or obsolete and our operating results would be harmed.
If we are unable to successfully develop and market new features, make enhancements to our existing features, or expand our offerings into new markets, our business, results of operations and competitive position may suffer.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our platform may become less competitive.
If customers do not expand their use of our platform beyond their current subscriptions and licenses, our ability to grow our business and operating results may be adversely affected.
Because our platform is sold to enterprises that often have complex operating environments, we may encounter long and unpredictable sales cycles, which could adversely affect our operating results in any given period.
A portion of our revenue is dependent on a few customers.
A significant portion of our revenue is dependent on third-party reseller customers, the efforts of which we do not control.
A security breach, network attack or information security incident could delay or interrupt service to our customers, result in the unauthorized access to, or use, modification or publishing of customer content or other information, harm our reputation or subject us to significant liability.
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Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and harm our business and operating results.
We could incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property could adversely affect our business, results of operations and financial condition.
Our platform utilizes open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
We employ third-party licensed software for use in or with our platform, and the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could adversely affect our business.
We are subject to governmental regulation and other legal obligations, including those related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business. Compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.
The reliability of our network and support infrastructure will be critical to our success. Sustained failures or outages could lead to significant costs and service disruptions, which could negatively affect our business, financial results and reputation.
Real or perceived errors, failures or bugs in our software, or in the software or systems of our third-party application providers and partners, could materially and adversely affect our operating results and growth prospects.
Adverse economic conditions or reduced technology spending may adversely impact our business.
We may require additional capital to support our business, and this capital might not be available on acceptable terms, if at all.
Risks Related to Our Business and Industry
We have a history of losses and may not achieve profitability in the future.
We generated a net loss of $121.5 million $74.8 million, and $66.6 million for the fiscal years ended January 31, 2020, 2019 and 2018, respectively. As of January 31, 2020, we had an accumulated deficit of $422.7 million, reflecting our losses recognized historically on a GAAP basis. We will need to generate and sustain increased revenue levels in future periods to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability. As a result, we may continue to experience operating losses for the indefinite future. Further, we expect our operating expenses to increase over the next several years as we hire additional personnel, incur additional expenses associated with our new and expanded facilities, expand our distribution channels, develop our technology and new features and face increased compliance costs associated with our growth and entry into new markets and geographies and operations as a public company. If our revenue does not increase to offset these and other potential increases in operating expenses, we may not be profitable in future periods. If we are unable to achieve and sustain profitability, the market price of our common stock may significantly decrease.
The effects of the COVID-19 pandemic have had and are expected to continue to have an adverse effect on our business, operations and financial results as well as the business and operations of our customers and potential customers.
The COVID-19 pandemic has disrupted business operations for us and our customers, suppliers, vendors and other parties with whom we do business and such disruptions are expected to continue for an indefinite period of time. In an effort to control the spread of COVID-19, governments and municipalities around the world have instituted restrictive measures, including orders to shelter-in-place, travel restrictions, and mandated business closures. The pandemic and resulting governmental restrictions and regulations have adversely affected businesses, economies, and financial markets globally, leading to an economic downturn, a sharp increase in unemployment and increased market volatility.
As a result of the COVID-19 pandemic, the operation of our business has been disrupted. We have temporarily closed our offices requiring all employees globally to work remotely. We have restricted non-essential business travel and canceled in-person marketing events, including our annual industry and customer event ONWARD20. While we continue to monitor regional developments relating to the COVID-19 pandemic to inform decisions on office re-openings and lifting of travel restrictions, these efforts may not be successful and may require additional costs. The uncertain duration of these measures have had and may continue to have increasingly negative effects on our sales efforts and revenue growth rates. In addition, our management team has, and will likely continue, to spend time, attention and resources monitoring the COVID-19 pandemic and seeking to manage its effects on our business and workforce.
The COVID-19 pandemic has had and we believe will continue to have a negative impact on our sales activities including our ability to attract, retain and sell additional products and features to our customers. In response to the COVID-19 pandemic some existing and potential customers, in particular among those in industries highly impacted by the pandemic, such as retail and food services, have and we expect other customers may reduce, suspend or delay technology spending, request to renegotiate contracts to obtain concessions such as extended billing and payment terms, shorten the duration of contracts or elect not to renew their subscriptions. If additional customers or potential customers take similar actions, our operating results and financial condition may be materially adversely impacted. Because our platform is offered as a subscription-based service and we generally recognize revenue
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from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not be fully reflected in our results of operations and overall financial performance until future periods.
The COVID-19 pandemic and measures taken to control its spread may adversely affect other aspects of our business as described in this “Risk Factors” section. As a result of the scale of the pandemic and measures taken to control its spread, our financial and operating results have been adversely affected and may differ materially from our historical results, and such adverse results may continue or worsen.
Because we recognize revenue from subscriptions for our platform over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results.
We generally recognize revenue from customers ratably over the terms of their agreements, which are typically one year in length but may be up to three years or longer in length. As a result, most of the revenue we report in each quarter is the result of subscription agreements entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any one quarter may not be reflected in our revenue results for that quarter. Any such decline, however, will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our products or a decline in our retention rate, including as a result of the ongoing COVID-19 pandemic, may not be fully apparent or reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.
Our revenue growth rate in recent periods may not be indicative of our future performance.
We experienced revenue growth rates of 37% from the fiscal year ended January 31, 2017 to the fiscal year ended January 31, 2018, 34% from the fiscal year ended January 31, 2018 to the fiscal year ended January 31, 2019, and 31% from the fiscal year ended January 31, 2019 to the fiscal year ended January 31, 2020. Our historical revenue growth rates are not indicative of future growth, and we may not achieve similar revenue growth rates in future periods. You should not rely on our revenue for any prior quarterly or annual periods as an indication of our future revenue or revenue growth. Our operating results may vary as a result of a number of factors, including our ability to execute on our business strategy, our ability to compete effectively for customers and business partners, the impact of the COVID-19 pandemic on our business and other factors that are outside of our control. If we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it could be difficult to achieve or maintain profitability.
We have a limited operating history and our business has evolved, which makes it difficult to predict our future operating results.
We were incorporated in 2006 and originally operated as an advertising services company. Our business has evolved several times since then. For example, we sold our advertising business to IAC/InterActiveCorp in 2012 and over the following years have become a platform that puts businesses in control of their facts online with their official answers in search. Many of the most popular features of our platform have only been launched in the past few years.
As a result of our limited operating history and recent changes to our platform and our sales model, our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and model our future growth. The dynamic nature of our business and our industry may make it difficult to evaluate our current business and future prospects, and as a result our historical performance should not be considered indicative of our future performance. We have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. In addition the duration and extent of the impact of the COVID-19 pandemic on our business and industry are uncertain and introduce additional uncertainty to our forecasts of future operating results. If our assumptions regarding these risks and uncertainties are incorrect or change due to changes in our industry, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
We have experienced rapid growth and significant changes to our organization and structure and may not be able to effectively manage such growth.
Our headcount and operations have grown substantially in recent years. We increased the number of our full-time employees from over 450 as of January 31, 2016 to over 1,200 as of January 31, 2020 and have hired several members of our senior management team in recent years.
We believe that our corporate culture has been a critical component of our success. We have invested substantial time and resources in building our team and nurturing our culture. As we expand our business and operate as a public company, we may find it difficult to maintain our corporate culture while managing our personnel growth. Any failure to manage our anticipated growth and organizational changes in a manner that preserves the key aspects of our culture could hurt our chance for future success, including our ability to recruit and retain personnel and effectively focus on and pursue our corporate objectives. Furthermore, as a result of the COVID-19 pandemic, our corporate culture may be difficult to maintain as all our global offices are closed and all employees globally work from home.
In addition, to manage the growth of our headcount, customer-base and operations, we will need to continue to improve our information technology infrastructure and our operational, financial and management systems and procedures. We have implemented
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many of these systems and procedures only recently, and they may not work as we expect or at all. Our anticipated additional headcount and capital investments will increase our costs, which will make it more difficult for us to address any future revenue shortfalls by reducing expenses in the short term. However, to the extent we cannot scale our information technology infrastructure, we will continue to rely on manual processes that are costly, inefficient and subject to error.
Finally, in order to successfully manage our rapid growth, our organizational structure has become more complex. We have added personnel and may need to continue to scale and adapt our operational, financial and management controls, as well as our reporting systems and procedures. The expansion of our systems and infrastructure may require us to commit additional financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase. If we fail to successfully manage our growth, we likely will be unable to successfully execute our business strategy, which could have a negative impact on our business, operating results and financial condition.
Failure to adequately maintain and scale our sales force will impede our growth.
Our revenue growth is substantially reliant on our sales force. Much of our sales process is relationship-driven, which requires a significant sales force. While we plan to maintain and scale our direct sales force, both domestically and internationally, we have historically had difficulty recruiting and retaining a sufficient number of sales personnel. If we are unable to adequately scale our sales force, we will not be able to reach our market potential and execute our business plan.
Identifying and recruiting qualified sales personnel and training them on our products requires significant time, expense and attention. Our financial results will suffer if our efforts to scale and train our direct sales force do not generate a corresponding increase in revenue. We have hired a significant number of direct sales personnel in recent quarters. If new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, including as a result of the COVID-19 pandemic or if we are unable to retain and develop talented sales personnel, we may not be able to realize the expected benefits of this investment or increase our revenue.
We have expanded and intend to continue to expand our international operations, which exposes us to significant risks.
In 2014, we opened our first office outside the United States, and we intend to continue to expand our operations abroad. We also sell our products and services throughout the world and intend to continue to expand our international sales efforts. Our international expansion has created and will create significant challenges for our management, administrative, operational and financial infrastructure. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks in addition to those we already face in the United States. Because of our limited experience with international operations and developing and managing sales in international markets, our international expansion efforts may not be successful.
Some of the specific risks we will face in conducting business internationally that could adversely affect our business include:
the difficulty of recruiting and managing international operations and the increased operations, travel, infrastructure and legal compliance costs associated with numerous international locations;
our ability to effectively price our multi-tiered subscriptions in competitive international markets;
our ability to identify and manage sales partners;
new and different sources of competition in each country or region;
potentially greater difficulty collecting accounts receivable and longer payment cycles;
the need to adapt and localize our products for specific countries, including differences in the location attributes and formats used in each country and differences in languages, for example in the case of our site search product, which relies on natural language processing;
the need to develop integrations with new third-party applications used by international customers;
the need to offer customer support in various languages;
difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions;
compliance with U.S. laws and regulations for foreign operations, including, without limitation, the Foreign Corrupt Practices Act, or FCPA, the U.K. Bribery Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell in certain foreign markets, and the risks and costs of non-compliance;
compliance with international laws and regulations, including without limitation, those governing privacy, data security and data transfer, such as the General Data Protection Regulation, or GDPR, which may impair our ability to grow our business or offer our service in some locations, may subject us to liability for non-compliance or may require us to change our business practices;
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expanded demands on, and distraction of, senior management;
difficulties with differing technical and environmental standards, data privacy and telecommunications regulations and certification requirements outside the United States;
varying levels of internet technology adoption and infrastructure;
tariffs and other non-tariff barriers, such as quotas and local content rules;
more limited protection for intellectual property rights in some countries;
adverse tax consequences;
fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk;
currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars;
restrictions on the transfer of funds;
deterioration of political relations between the United States and other countries;
natural disasters, pandemics including the ongoing COVID-19 pandemic, acts of terrorism and other events beyond our control; and
political or social unrest or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
Also, our network service provider fees outside of the United States are generally higher than domestic rates, and our gross margin may be affected and may fluctuate as we expand our operations and customer base worldwide.
Our failure to manage any of these risks successfully could harm our international operations, and adversely affect our overall business, operating results and financial condition.
Some of our customers and Knowledge Network application providers also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if these customers and application providers are not able to successfully manage these risks.
Our growth depends in part on the success of our strategic relationships with existing and prospective Knowledge Network application providers.
We have established strategic relationships with more than 175 third-party service and application providers that comprise our Knowledge Network, including Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri, Yelp and many others. These application providers provide us with direct access to update content on their websites and applications. This direct access enables us to control our customers' business listings on the Knowledge Network application providers' websites and applications and to push real-time or nearly real-time updates to those business listings. In order to maintain relationships with application providers, we may need to modify our products or strategies in a way that may be adverse to our business and financial results. Furthermore, if we were to lose access to these applications, either in whole or in part, our Knowledge Network would not be as efficient, accurate or competitive. Our customers may also place a significant value on particular application providers such as Google such that the termination or impairment of our relationship with one or a limited number of application providers could lead to a loss of a significant number of customers.
In order to grow our business, we anticipate that we will need to continue to maintain and potentially expand these relationships. We may be unsuccessful in renegotiating our agreements with these third-party application providers or third-party application providers may insist on fees to access their applications. Additionally, our contracts with these third-party application providers may be canceled after a notice period or may not be renewed, and we could lose access to these resources without having sufficient time to replace them. We believe we will also need to establish new relationships with third-party application providers, including third-party application providers in new geographic markets that we enter, and third-party application providers that may emerge in the future as leading sources of information about businesses for end consumers. Identifying potential third-party application providers, and negotiating and documenting relationships with them, requires significant time and resources. Our competitors may be more effective than we are in providing incentives to application providers to favor their products or services or to prevent or reduce subscriptions to our products. In addition, the acquisition of a competitor by one of our third-party application providers could result in the termination of our relationship with that third-party application provider, which, in turn, could lead to decreased customer subscriptions. If we are unsuccessful in establishing or maintaining our relationships with third-party application providers, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results could suffer.
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We do not have a long history with our pricing models and changes could adversely affect our operating results.
We have limited experience with respect to determining the optimal prices and contract length for our platform. For example, we recently began offering capacity-based pricing for our Pages and Answers products, including an initial free-trial period for Answers. There is no assurance that this new pricing and distribution model will be successful thus adversely affecting our financial results. Furthermore, as the markets for our features grow, as new competitors introduce new products or services that compete with ours or reduce their prices, or as we enter into new international markets, we may be unable to attract new customers or retain existing customers at the same price. Moreover, large customers, which have historically been the focus of our direct sales efforts, may demand greater price discounts.
As we expand internationally, we also must determine the appropriate price to enable us to compete effectively internationally. In addition, if the mix of features we sell changes, then we may need to, or choose to, revise our pricing. As a result, in the future we may be required to reduce our prices or offer shorter contract durations, which could adversely affect our revenue, gross margin, profitability, financial condition and cash flow.
Our success depends on a fragmented internet environment for finding information, particularly information about businesses.
We believe that our platform offers value to our customers in part because of the difficulty for a customer to update information about their business across many websites and apps, many of which are owned or controlled by different entities and receive information from a variety of sources. Industry consolidation or technological advancements could result in a small number of websites or applications emerging as the predominant sources of information about businesses thereby creating a less fragmented internet environment for purposes of end consumer searches about businesses. Additionally, we may enter new geographies with less fragmented internet environments. If most end consumers relied on a few websites or applications for this information, or if reliably accurate information across the most used websites and applications were generated from a single source, the need to synchronize information about a business and for our platform could decline significantly. In particular, if larger providers of internet services were able to consolidate or control key websites and apps from which end consumers seek information about businesses, including regarding physical locations, other entities and attributes, our platform may become less necessary or attractive to our customers, and our revenue would suffer accordingly.
Our platform faces competition in the marketplace. If we are unable to compete effectively, our operating results could be adversely affected.
The market for our features is competitive, rapidly evolving and fragmented, and is subject to changing technology and shifting customer needs. Many vendors develop and market products and services that compete to varying extents with our features, and we expect competition in our market to intensify. Moreover, industry consolidation may increase competition. Additionally, new entrants, specifically application providers, that enter our markets through acquisitions or otherwise, would increase competition in our markets significantly. As we develop our platform, we will introduce products and features that compete in new markets and as a result we will face new competitors. For example, in October 2019 we launched Answers, our site search product, which competes with other search products.
We currently face many competitors with a variety of product offerings. These companies have developed, or are developing, products that currently, or in the future are likely to, compete with some or all of our features. Also, a number of potential new competitors, including those with longer operating histories, greater name recognition, more established customer bases or significantly greater financial, technical, marketing and other resources than we do, may decide to create or acquire products that compete with our platform or products or we may develop products that compete with their existing platforms. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. We could lose customers if our competitors introduce new competitive products, add new features to existing competitive products, acquire competitive products, reduce prices, form strategic alliances with other companies or are acquired by third parties with greater available resources. If our competitors' products, services or technologies become more accepted than our features, if they are successful in bringing their products or services to market earlier than we bring our features to market, or if their products or services are more technologically capable than our features, then our revenue growth could be adversely affected. Certain of our existing and new competitors have or may develop technologies and services that compete with specific products or features in our platform seeking to be best-in-class. To the extent our customers or potential customers choose to work with several of these vendors rather than implement our platform, our revenue growth could be adversely affected. In addition, some of our competitors offer their products and services at a lower price. If we are unable to achieve our target pricing levels, our margins and operating results could be negatively affected.
Business and professional service providers may not widely adopt our platform to manage their information or as an important part of their marketing strategy, which would limit our ability to grow our business.
Our ability to grow our business and increase revenue depends on our success in educating businesses and professional service providers about the potential benefits of our cloud-based platform. Cloud applications for organizing and managing information about a business, particularly for their locations, entities and attributes, have not previously been widely adopted. Concerns about cost, security, reliability and other issues may cause businesses and professional service providers not to adopt our platform. Moreover,
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businesses and professional service providers who have already invested substantial resources in other marketing strategies and data management systems or methods may be reluctant to adopt a new approach like ours to supplement or replace existing systems or methods. If businesses and professional service providers do not widely adopt software such as ours, our ability to grow our business will be limited.
If customers do not renew their subscriptions for our platform or if they reduce their subscriptions at the time of renewal, our revenue will decline and our business will suffer.
Our customers have no obligation to renew their subscriptions for our platform after the expiration of their subscription periods. In the normal course of business, some customers have elected not to renew their subscriptions with us. Our customers may seek to renew their subscriptions for fewer features, at renegotiated rates, or for shorter contract lengths, all of which could reduce the amount of the subscription. Our renewal rates may decline or fluctuate as a result of a number of factors, including limited customer resources, changes in our pricing and subscription models, customer satisfaction with our platform, the acquisition of our customers by other companies and deteriorating general economic conditions. For example, as a result of the COVID-19 pandemic certain customers have reduced their subscriptions, elected not to renew their subscriptions, reduced length of contracts, requested extended billing and payment terms or sought more favorable rates. If our customers do not renew their subscriptions for our platform or decrease the amounts they spend with us, our revenue will decline and our business will suffer. If our renewal rates fall significantly below the expectations of the public market, equity research analysts or investors, the price of our common stock could also be harmed.
If we are unable to attract new customers, our revenue growth could be slower than we expect and our business may be harmed.
To increase our revenue, we must add new customers. If competitors introduce lower cost or differentiated products or services that are perceived to compete with our features, our ability to sell our features based on factors such as pricing, technology and functionality could be impaired. As a result, we may be unable to attract new customers at rates or on terms that would be favorable or comparable to prior periods, which could negatively affect the growth of our revenue. Furthermore, we have canceled in-person customer and industry events including ONWARD, our annual industry and customer event, as a result of the COVID-19 pandemic. We have also allocated marketing resources to focus on virtual events, virtual lead generation, and tools to help our sales personnel connect virtually with customers and potential customers. These new marketing efforts may not be successful and may not attract as many new customers as our historical customer and industry events, which could harm our future revenue and revenue growth.
If we fail to integrate our platform with a variety of third-party technologies, our platform may become less marketable and less competitive or obsolete and our operating results would be harmed.
Our platform must integrate with a variety of third-party technologies, and we need to continuously modify and enhance our platform to adapt to changes in cloud-enabled hardware, software, networking, mobile, browser and database technologies. Any failure of our platform to operate effectively with future technologies could reduce the demand for our platform, resulting in customer dissatisfaction and harm to our business. If we are unable to respond to these changes in a cost-effective and timely manner, our platform may become less marketable and less competitive or obsolete and our operating results may be negatively affected. In addition, an increasing number of customers are utilizing mobile devices to access the internet and conduct business. If we cannot continue to effectively make our platform available on these mobile devices and offer the information, services and functionality required by enterprises that widely use mobile devices, we may experience difficulty attracting and retaining customers, which could negatively affect our revenue.
If we are unable to successfully develop and market new features, make enhancements to our existing features, or expand our offerings into new markets, our business, results of operations and competitive position may suffer.
The software industry is subject to rapid technological change and evolving standards and practices, as well as changing customer needs, requirements and preferences. Our ability to attract new customers and increase revenue from existing customers depends, in part, on our ability to enhance and improve our existing features, increase adoption and usage of our platform and introduce new products and features, including Yext Answers. We expend significant resources on research and development to enhance our platform and to incorporate additional features, improve functionality or add other enhancements in order to meet our customers' rapidly evolving demands. The success of any enhancements or new features depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance. We may not be successful in these efforts, which could result in significant expenditures that could impact our revenue or distract management's attention from current offerings.
Increased emphasis on the sale and development of new features could distract us from other parts of the business and the development and sale of our core platform, negatively affecting our overall sales. We have invested and expect to continue to invest in new businesses, products, features, services, and technologies. Such endeavors may involve significant risks and uncertainties, including insufficient revenue from such investments to offset any new liabilities assumed and expenses associated with these new investments, inadequate return of capital on our investments, distraction of management from current operations, failure to adequately develop and enhance existing products and unidentified issues not discovered in our due diligence of such strategies and offerings that could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities. Because these new strategies and offerings are inherently risky, no assurance can be given that they will be successful.
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As we enhance our platform and develop new features, our platform has also become increasingly sophisticated requiring additional technology, sales, customer support and professional services resources. In order for our customers to understand and derive value from these new products and features, we will need to devote additional resources to train our sales personnel and provide higher-quality customer support and professional services. In addition, as our software becomes more complex, we may fail to detect errors, bugs or vulnerabilities.
Even if we are successful in these endeavors, diversifying our platform offerings will bring us more directly into competition with other providers that may be better established or have greater resources than we have. Our new features or enhancements could fail to attain sufficient market acceptance for many reasons, including:
delays in introducing new, enhanced or modified features;
failure to accurately predict market demand or end consumer preferences;
defects, errors or failures in any of our features or our platform;
introduction of competing products;
poor business conditions for our customers or poor general macroeconomic conditions;
changes in legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our platform;
failure of our brand promotion activities or negative publicity about the performance or effectiveness of our existing features;
disruptions or delays in the availability and delivery of our platform; and
our ability to convert free trials into paid subscriptions.
There is no assurance that we will successfully identify new opportunities or develop and bring new features to market on a timely basis, or that products and technologies developed by others will not render our platform obsolete or noncompetitive, any of which could materially and adversely affect our business and operating results and compromise our ability to generate revenue. If our new features or enhancements do not achieve adequate acceptance in the market, or if our new features do not result in increased sales or subscriptions, our brand and competitive position will be impaired, our anticipated revenue growth may not be achieved and the negative impact on our operating results may be particularly acute because of the upfront technology and development, marketing, advertising and other expenses we may incur in connection with the new feature or enhancement.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our platform may become less competitive.
Our future success depends on our ability to adapt and be innovative. To attract new customers and increase revenue from existing customers, we need to continue to enhance and improve our offerings to meet customer needs at prices that our customers are willing to pay. Such efforts will require adding new functionality and responding to technological advancements, which will increase our research and development costs. If we are unable to develop new features that address our customers' needs or to enhance and improve our platform in a timely manner, we may not be able to maintain or increase market acceptance of our platform. Our ability to grow is also subject to the risk of future disruptive technologies. Access and use of our platform is provided via the cloud, which, itself, was disruptive to the previous enterprise software model. If new technologies emerge that are able to deliver software and related applications at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely affect our ability to compete.
If customers do not expand their use of our platform beyond their current subscriptions and licenses, our ability to grow our business and operating results may be adversely affected.
Our ability to grow our business depends in part on our ability to encourage current and future customers to subscribe to our higher priced packages with more extensive features. If we fail to achieve market acceptance of new features, or if a competitor establishes a more widely adopted platform, our revenue and operating results will be harmed. In addition, customers may initially purchase licenses for only a portion of the locations or entities that comprise their business. If these customers do not expand the number of licenses managed with our platform, our revenue and operating results will be harmed.
Because our platform is sold to enterprises that often have complex operating environments, we may encounter long and unpredictable sales cycles, which could adversely affect our operating results in any given period.
Our ability to increase revenue and achieve profitability depends, in large part, on widespread acceptance of our platform by enterprises. As we target our sales efforts at these customers, we face greater costs, longer sales cycles and less predictability in completing some of our sales. As a result of the variability and length of the sales cycle, we have only a limited ability to forecast the timing of sales. A delay in or failure to complete sales could harm our business and financial results, and could cause our financial results to vary from period to period. Our sales cycle varies widely, reflecting differences in potential customers' decision-making
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processes, procurement requirements and budget cycles, and is subject to significant risks over which we have little or no control, including:
customers' budgetary constraints and priorities;
the timing of customers' budget cycles;
the need by some customers for lengthy evaluations prior to purchasing products; and
the length and timing of customers' approval processes.
Our typical direct sales cycles for more substantial enterprise customers can often be long, and we expect that this lengthy sales cycle may continue or could even increase. In the large enterprise market, the customer’s decision to use our platform may be an enterprise-wide decision or may require the approval of senior management, which may not only lengthen the sales cycle but also reduce the likelihood of completing a sale. The COVID-19 pandemic has disrupted the operations of our customers making sales cycles more complex. Delayed and more complex sales cycles could cause our operating results and financial condition to suffer in a given period. If we cannot adequately scale our direct sales force, we will experience further delays in signing new customers, which could slow our revenue growth.
A portion of our revenue is dependent on a few customers.
For the fiscal years ended January 31, 2020, 2019 and 2018, the aggregate of our top five customers accounted for approximately 11%, 14% and 17%, respectively, of our revenue. We anticipate that sales of our platform to a relatively small number of customers will continue to account for a significant portion of our revenue in future periods. If we were to lose any of our significant customers, our revenue could decline and our business and results of operations could be materially and adversely affected. These negative effects could be exacerbated by customer consolidation, changes in technologies or solutions used by customers, changes in demand for our features, selection of suppliers other than us, customer bankruptcies or customer departures from their respective industries, pricing competition or deviation from marketing and sales methods away from physical location retailing, any one of which may result in even fewer customers accounting for a high percentage of our revenue and reduced demand from any single significant customer.
In addition, some of our customers have used, and may in the future use, the size and relative importance of their purchases to our business to require that we enter into agreements with more favorable terms than we would otherwise agree to, to obtain price concessions, or to otherwise restrict our business.
A significant portion of our revenue is dependent on third-party reseller customers, the efforts of which we do not control.
Third-party reseller customers comprise a significant portion of our revenue. In transactions with third-party reseller customers, we are only party to the transaction with the reseller and are not a party to the reseller's transaction with its customer, and we do not control the efforts of these resellers. Such resellers may elect not to renew their subscriptions with us or may elect to purchase significantly fewer licenses, which would materially adversely affect our operating results and financial condition. In addition, our third-party reseller customers, which often sell to small and midsized organizations that can have liquidity and expense limitations, are also susceptible to global economic weakness and uncertainty, including as a result of the COVID-19 pandemic. See also "—If customers do not renew their subscriptions for our platform or if they reduce their subscriptions at the time of renewal, our revenue will decline and our business will suffer." Lower demand from certain of our reseller customers has resulted in them not renewing their subscriptions with us, purchasing fewer licenses, attempting to renegotiate contracts to obtain concessions and requesting extended billing and payment terms. Such an adverse effect on our financial condition and operating results would not be fully reflected in our results of operations until future periods. In addition, if such third-party reseller customers merge or consolidate with other businesses, declare bankruptcy or depart from their respective industries, our business could be harmed. For example, consolidation among our third-party reseller customers may require us to renegotiate agreements on less favorable terms, including longer payment periods, or may lead to a termination of our agreements with these resellers. We may expend significant resources managing these relationships. Further, in some international markets, we grant certain reseller customers the exclusive right to sell our features. If those reseller customers to whom we have granted exclusive rights elect not to renew their subscriptions or to purchase significantly fewer licenses, then we may be unable to adequately address sales opportunities in that territory. If we are unable to maintain or replace our contractual relationships with our existing reseller customers, efficiently manage our relationships with them or establish new contractual relationships with other third parties, we may fail to retain customers or acquire potential new customers and may experience delays and increased costs in adding or replacing customers that were lost, any of which could materially adversely affect our business, operating results and financial condition.
A security breach, network attack or information security incident could delay or interrupt service to our customers, result in the unauthorized access to, or use, modification or publishing of customer content or other information, harm our reputation or subject us to significant liability.
We are vulnerable to computer viruses, break-ins, phishing attacks, attempts to overload our servers with denial-of-service or other attacks and similar disruptions from unauthorized use of our computer systems. Any such attack, or any information security incident from any other source affecting us or our services providers, including through employee error or misconduct or additional vulnerabilities introduced by remote work arrangements, could lead to interruptions, delays, website or application shutdowns, loss of
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data or unauthorized access to, or use or acquisition of, personal information, confidential information or other data that we or our services providers process or maintain.
For example, in December 2015, we suffered a denial-of-service attack, which resulted in the inability for some of our customers to access our platform for several hours. If we experience additional compromises to our security that result in performance or availability problems, the complete shutdown of our platform or the loss of, or unauthorized access to, personal information or other types of confidential information, our customers or application providers may assert claims against us for credits, refunds or other damages, and may lose trust and confidence in our platform. Additionally, security breaches or other unauthorized access to, or use or acquisition of, personal information or other types of confidential information that we or our services providers maintain, could result in claims against us for identity theft or other similar fraud claims, breach of contract or indemnity, governmental enforcement actions, litigation, fines and penalties or adverse publicity, and could cause our customers and partners to lose trust in us, any of which could have an adverse effect on our business, reputation, operating results and financial condition. Our existing insurance coverage may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims related to a security breach. An insurer may also deny coverage as to a future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies could have a material adverse effect on our business. We could also be required to incur significant costs for remediation or expend significant capital and other resources to address a security breach. The techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, often are not recognized until launched against a target and may originate from less regulated countries, we may be unable to proactively address these techniques or to implement adequate preventative measures.
In addition, customers' and application providers' accounts and listing pages hosted on our platform could be accessed by unauthorized persons for the purpose of placing illegal, abusive or otherwise unauthorized content on their respective websites and applications. If an unauthorized person obtained access to a customer's account or our platform, such person could update the customer's business information with abusive content or create and disseminate false responses to reviews. This type of unauthorized activity could negatively affect our ability to attract new customers and application providers, deter current customers and application providers from using our platform, subject us to third-party lawsuits, regulatory fines, indemnification requests or additional liability under customer contracts, or other action or liability, any of which could materially harm our business, operating results and financial condition.
We previously identified and continue to identify material weaknesses in our internal control over financial reporting. We may fail to remediate the identified material weakness, identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, and as a result, investor confidence in us and the value of our common stock could be materially and adversely affected.
As a public company, we are required to establish and maintain internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on internal control over financial reporting. Under standards established by the United States Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
In connection with the audit of the fiscal year 2019 consolidated financial statements, we and our independent registered public accounting firm identified a material weakness in information technology general controls ("IT General Controls"). The deficiencies in IT General Controls also resulted in a conclusion that manual controls that rely on data produced by and maintained within these affected information technology systems and automated controls within these affected information technology systems across several of our significant classes of transactions were ineffective. Based on the nature of these deficiencies in IT general controls, management concluded that the two material weaknesses from fiscal years prior to 2019 related to the revenue recognition process and financial close continued to exist as of January 31, 2019. As of January 31, 2020, management has determined that these previously identified material weaknesses had been remediated.
Notwithstanding, as of January 31, 2020, management has identified a material weakness in our internal control over financial reporting associated with processes to calculate, record and account for sales commissions. The identified deficiencies include controls related to reliance on certain outsourced IT service providers used in the processes to calculate, record and account for sales commissions and the related business process controls that rely upon information that was subject to the outsourced IT service providers’ control environment. Management has determined that the aggregate impact of these ineffective controls resulted in a material weakness.
We are taking steps to remediate this material weakness. However, we cannot at this time estimate how long it will take to remediate the material weakness, and we may not ever be able to remediate the material weakness. For additional information regarding this material weakness and related remediation activities, see Item 4 "Controls and Procedures." If we are unable to successfully remediate the material weakness and otherwise establish and maintain an effective system of internal control over financial reporting, the reliability of our financial reporting, investor confidence in us and the value of our common stock could be
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materially and adversely affected. In addition, we may discover other control deficiencies in the future, and we cannot assure you that we will not have a material weakness in future periods.
Additionally, the process of designing, implementing and maintaining internal control over financial reporting required to comply with Section 404 is time consuming, costly and complicated. Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation and maintenance could cause us to fail to meet our reporting obligations. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation. Deficiencies in our internal control over financial reporting that are identified in such assessments may be deemed to be material weaknesses or may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our operating results.
We have in the past acquired and may in the future seek to acquire or invest in businesses, features or technologies that we believe could complement or expand our platform, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
Although we have previously acquired businesses, we have limited acquisition experience. If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:
unanticipated liabilities associated with the acquisition;
difficulty incorporating acquired technology and rights into our platform and of maintaining quality and security standards consistent with our brand;
inability to generate sufficient revenue to offset acquisition or investment costs;
incurrence of acquisition-related costs;
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;
difficulty converting the customers of the acquired business into our customers;
diversion of our management's attention from other business concerns;
adverse effects to our existing business relationships as a result of the acquisition;
potential loss of key employees;
use of resources that are needed in other parts of our business; and
use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. If an acquired business fails to meet our expectations, our business, operating results and financial condition may suffer.
Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and harm our business and operating results.
Patent and other intellectual property disputes are common in our industry. Some companies, including some of our competitors, own large numbers of patents, copyrights and trademarks, which they may use to assert claims against us. In addition, because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our features.
Third parties may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us. If asserted, we cannot assure you that an infringement claim will be successfully defended. Certain third parties have
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substantially greater resources than we have and may be able to sustain the costs of intellectual property litigation for longer periods of time than we can. A successful claim against us could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our platform, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications or refund fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.
We could incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property could adversely affect our business, results of operations and financial condition.
Our success depends, in part, on our ability to protect our proprietary methods and technologies. There can be no assurance that the particular forms of intellectual property protection that we seek, including business decisions about when to file trademark applications and patent applications, will be adequate to protect our business. We intend to continue to file and prosecute patent applications when appropriate to attempt to protect our rights in our proprietary technologies. However, there can be no assurance that our patent applications will be approved, that any patents issued will adequately protect our intellectual property, that the scope of the claims in our issued patents will be sufficient or have the coverage originally sought, that our issued patents will provide us with any competitive advantages, or that such patents will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable.
We could be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights, determine the validity and scope of our proprietary rights or those of others, or defend against claims of infringement or invalidity. Such litigation may fail, and even if successful, could be costly, time-consuming and distracting to management and could result in a diversion of significant resources. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that we infringe the counterclaimant's own intellectual property. An adverse determination of any litigation or defense proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly and could put our related pending patent applications at risk of not being issued. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. During the course of litigation there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Any of our patents, copyrights, trademarks or other intellectual property rights could be challenged by others or invalidated through administrative processes or litigation. Furthermore, there can be no guarantee that others will not independently develop similar products, duplicate any of our products or design around our patents.
We also rely, in part, on confidentiality agreements with our employees, consultants, advisors, customers and others in our efforts to protect our proprietary technology, processes and methods. These agreements may not effectively prevent disclosure of our confidential information, and it may be possible for unauthorized parties to copy our software or other proprietary technology or information, or to develop similar software independently without our having an adequate remedy for unauthorized use or disclosure of our confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in these cases, we would not be able to assert any trade secret rights against those parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
In addition, the laws of some countries do not protect intellectual property and other proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying, transfer and use of our proprietary technology or information may increase. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.
We cannot be certain that our means of protecting our intellectual property and proprietary rights will be adequate or that our competitors will not independently develop similar technology. If we fail to meaningfully protect our intellectual property and proprietary rights, our business, operating results and financial condition could be adversely affected.
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Our platform utilizes open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Our platform utilizes software governed by open source licenses. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a specified manner. In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, or to re-engineer all or a portion of software, each of which could reduce or eliminate the value of our platform. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business.
We employ third-party licensed software for use in or with our platform, and the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could adversely affect our business.
Our platform incorporates certain third-party software obtained under licenses from other companies. We anticipate that we will continue to rely on such third-party software and development tools in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or the software we currently license may be difficult or costly to replace. In addition, integration of the software used in our platform with new third-party software may require significant work and require substantial investment of our time and resources. Also, to the extent that our platform depends upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our platform, delay new feature introductions, result in a failure of our platform and injure our reputation. Our use of additional or alternative third-party software would require us to enter into license agreements with third parties.
The reliability of our network and support infrastructure will be critical to our success. Sustained failures or outages could lead to significant costs and service disruptions, which could negatively affect our business, financial results and reputation.
Our reputation and ability to attract, retain, and serve our customers and application providers are dependent upon the reliable performance of our platform and our underlying technical and network infrastructure. Our customers access our platform through our website and related technologies. We rely on internal systems and third-party service providers, including data center, cloud computing, bandwidth and telecommunications equipment providers, to maintain the availability of our platform. If any service provider fails to provide sufficient capacity to support our platform, experiences service outages, reduces or suspends service due to a natural disaster or pandemic such as the COVID-19 pandemic or otherwise ceases to do business, such failure could interrupt our customers' access to our services. For example, we currently serve our customers from third-party data center hosting facilities and cloud computing providers located in the United States, Germany and Japan. Our primary data center is in New Jersey, and our backup data center is in Texas. If these data centers or cloud computing services become unavailable to us without sufficient advance notice, if we are unable to renew our agreements with these providers or if a provider is acquired or ceases business, we would likely experience delays in delivering our platform until we could migrate to an alternate provider. Our disaster recovery program contemplates transitioning our platform to our backup center in the event of a catastrophe and our platform may be unavailable, in whole or in part, during any transition procedure.
We have experienced, and will in the future experience, interruptions, outages and other performance problems. Such disruptions may be due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of customers and partners accessing our platform simultaneously and inadequate design. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.
If we do not accurately predict our infrastructure requirements, our existing customers may experience performance degradation or service outages, which may subject us to financial penalties, financial liabilities and customer losses. For example, to support the international growth of our business, we have expanded and may need to continue to expand capacity outside the United States, but we may not be able to address future capacity constraints, either through existing or alternative providers, in a cost-effective and timely manner, if at all. When we add capacity, we may move or transfer our data and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our services, which may damage our business.
Natural disasters and other events beyond our control could adversely affect us.
Natural disasters or other catastrophic events may cause damage or disruption to our operations and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, civil unrest, pandemics, acts of terrorism and other events beyond our control. While we maintain crisis management and disaster response plans, natural disasters and other events could also make it difficult or impossible for us to continue operations, and could decrease demand for our platform. For example, as a result of the COVID-19 pandemic the operation of our business has been disrupted. We have temporarily closed our offices requiring all of our employees globally to work remotely. Our corporate
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headquarters is located in New York City, an area that is significantly affected by the COVID-19 pandemic. We have restricted non-essential business travel and canceled in-person marketing events, including our annual industry and customer event ONWARD. The duration of the business disruption and related financial impact cannot be reasonably estimated at this time. However, a prolonged disruption to our operations may have a material adverse effect on our business reducing operational efficiency and increasing operational costs.
In addition, our data centers are located in New Jersey and Texas and our cloud computing providers operate from facilities in northern Virginia, Frankfurt, Germany and Tokyo, Japan, making our business particularly susceptible to natural disasters and other catastrophic events in those areas. Any natural disaster or other event affecting our data centers could have an adverse effect on our financial condition and operating results.
Real or perceived errors, failures or bugs in our software, or in the software or systems of our third-party application providers and partners, could materially and adversely affect our operating results and growth prospects.
Our features are highly technical and complex. Our software has previously contained, and may now or in the future contain, undetected errors, bugs, or vulnerabilities. Some errors in our software may only be discovered after the software has been deployed. Any errors, bugs, or vulnerabilities discovered in our software after it has been deployed could result in damage to our reputation, loss of customers, partners or application providers, loss of revenue or liability for damages.
In addition, the proper functioning of our platform is dependent on the ability of our Knowledge Network application providers and partners to maintain the availability and proper functioning of their software integrations with our systems and also is dependent on the ability of our third-party application providers to maintain the availability and proper functioning of their websites and applications on which business listing information is published for customers. For example, a number of our Knowledge Network application providers provide us with an Application Program Interface, or API, on which our ability to interface with that provider is based. Furthermore, in a rapidly changing business environment, for example in connection with the COVID-19 pandemic, our Knowledge Network application providers may experience limitations and delays, which could limit the functionality of our platform. If the functionality of the software, APIs or websites of our third-party application providers is impaired, our customers may attribute such limitations to us and our platform thus damaging our reputation and customer relationships. If our Knowledge Network application providers do not maintain the availability and proper functioning of their software, APIs, websites and applications, our business, operating results and financial condition could be materially affected.
We depend on our senior management team and the loss of our chief executive officer, president or one or more key employees could adversely affect our business.
Our success depends largely upon the continued services of our key executive officers. In particular, two of our co-founders, Howard Lerman and Brian Distelburger, who serve as our Chief Executive Officer and President, respectively, are critical to our vision, strategic direction, feature innovation, culture and overall business success. We also rely on our leadership team in the areas of research and development, marketing, sales, services and general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. For example during the quarter ended October 31, 2020, we announced changes to the leadership team for our sales and research and development functions, and the departure of these key executives may disrupt strategic initiatives of these functions. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of our executive officers or key employees could have a serious adverse effect on our business.
The failure to attract and retain additional qualified personnel could prevent us from executing our business strategy.
To execute our business strategy, we must attract and retain highly qualified personnel. In particular, we compete with many other companies for software developers with high levels of experience in designing, developing and managing cloud-based software, as well as for skilled information technology, sales, marketing, legal and accounting professionals, and we may not be successful in attracting and retaining the professionals we need. In the future, we may experience difficulty in hiring and difficulty in retaining highly skilled employees with appropriate qualifications. We face intense competition for qualified individuals from numerous software and other technology companies. Competition for qualified personnel is particularly intense in the New York area. We may incur significant costs to attract and retain qualified personnel, and we may lose new employees to our competitors or other technology companies before we capitalize the benefit of our investment in recruiting and training them. We also employ a number of foreign nationals on work visas, primarily under the H-1B visa. Current and future restrictions on the availability of visas or delays in the issuance of visas could impair our ability to employ skilled professionals, which could have an adverse effect on our business.
In addition, in making employment decisions, particularly in the software industry, job candidates often consider the value of the stock options or other equity incentives they are to receive in connection with their employment. If the price of our stock declines, or experiences significant volatility, our ability to attract or retain key employees will be adversely affected. Also, as employee options vest, we may have difficulty retaining key employees or may be required to grant larger equity awards from our equity plans, which would cause dilution. If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.
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If we fail to provide high-quality customer support and professional services, our business and reputation may suffer.
High-quality customer support and professional services are important for the successful retention of existing customers. Providing support and services, including education, training, data cleansing and processing, ongoing support as well as custom development services, requires that our personnel have specific knowledge and expertise of our platform, making it more difficult for us to hire qualified personnel and to scale up these operations. The importance of high-quality customer support and professional services and the difficulty of hiring qualified personnel will increase as we expand our business and pursue new customers and as our platform becomes more complex with the development more features and capabilities. If we do not provide effective and timely ongoing customer support and professional services, our ability to sell additional features to, or to retain, existing customers may suffer, and our reputation with existing or potential customers may be harmed.
In addition, certain aspects of our customer support, for example data cleansing, are conducted manually and are subject to error. While there are processes designed to verify the accuracy of data, if information is not updated or matched correctly, our reputation may be harmed and we may be subject to liability.
If we fail to continue to develop our brand, our business may suffer.
We believe that continuing to develop and maintain awareness of our brand is critical to achieving widespread acceptance of our platform and is an important element in attracting and retaining customers. Efforts to build our brand may involve significant expense and may not generate customer awareness or increase revenue at all, or in an amount sufficient to offset expenses we incur in building our brand. In addition, we sell our features to companies in a number of industries, including healthcare, retail and financial services. If we are not successful in building our brand, we may become identified with a single industry, which could make it more difficult for us to penetrate other industries.
Promotion and enhancement of our brand will depend largely on our success in being able to provide high quality, reliable and cost-effective features. If customers do not perceive our platform as meeting their needs, or if we fail to market our platform effectively, we will likely be unsuccessful in creating the brand awareness that is critical for broad customer adoption of our platform.
Adverse economic conditions or reduced technology spending may adversely impact our business.
Our business depends on the overall demand for technology and on the economic performance of our current and prospective customers. In general, worldwide economic conditions may remain unstable, and these conditions would make it difficult for our customers, prospective customers and us to forecast and plan future business activities accurately, and they could cause our customers or prospective customers to reevaluate their decision to purchase our features. Weak global economic conditions, or a reduction in technology spending even if economic conditions stabilize, could adversely impact our business and results of operations in a number of ways, including longer sales cycles, lower prices for our platform, fewer subscriptions and lower or no growth. For example, the COVID-19 pandemic and resulting governmental restrictions and regulations have created additional uncertainty in the global economy and a sharp increase in unemployment. The prolonged uncertainty and weak economic conditions relating to the COVID-19 pandemic has led certain of our customers and potential customers to decrease the rate of their information technology spending, has adversely affected their ability or willingness to purchase our platform and has caused them to delay purchasing decisions or reduce the value or duration of their subscriptions, all of which adversely affected our operating results.
In addition, the economies of countries in Europe have been experiencing weakness associated with high sovereign debt levels, weakness in the banking sector and uncertainty over the future of the European Union, including uncertainty regarding Brexit. We have operations, as well as current and potential new customers, throughout Europe. The European Union's economy also suffered a sharp downturn due to the COVID-19 pandemic, and economic conditions in Europe and other key markets for our platform remain weak. As a result, we have experienced negative impacts on our sales activities in Europe. If such conditions deteriorate further, customers may delay or reduce their information technology spending. In addition, the legal, regulatory and economic impacts of Britain’s exit from the European Union in January 2020 are not fully known at this time and will depend in part on the negotiated trade agreements or the nature of a “no-deal” exit. The outcome of these events may, among other things, increase the costs and complexity of our operations in Europe including our ability to hire and retain employees.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States, or U.S. GAAP, are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
Our estimates of market opportunity, market size and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves our forecasted growth, our business could fail to grow at similar rates, if at all.
Market opportunity and size estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. We had historically analyzed the size of our estimated total addressable market, solely with respect to locations, using data published by third parties as well as internally generated data and assumptions regarding our
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ability to generate revenue from those locations. We have not independently verified the estimate of locations published by third parties and cannot assure you of its accuracy or completeness. In addition, our estimated market size for location-related data was based on an assumed annual revenue per location. As we continue to develop new features, the methodology and assumptions used to estimate new market opportunities, including the assumed revenue generated by new licenses managed through our platform, may differ materially from methodologies and assumptions previously used to estimate total addressable market with respect to locations. As we enter a new geographic market, we may initially provide discounts to customers to gain market traction, and the amount and effect of these discounts may vary greatly by geography and size of market and may cause our average revenue per location to be lower than historical averages.
We continue to evaluate our total addressable market with respect to new product offerings and new markets. With the addition of new products and features including our site search product, we are targeting and positioning our platform towards new markets. To estimate the size of these new markets and their growth rates, we have relied on historical estimates and forecasts provided by industry publications and other third-party sources, including Gartner. The target market in which we operate is also subject to a high degree of uncertainty and risk. Our customers as well as analysts and other market participants may disagree with our assessment of our target markets and we may never successfully compete in these markets.
These estimates of total addressable market and growth forecasts are subject to significant uncertainty, are based on assumptions and estimates that may not prove to be accurate and are based on data published by third parties that we have not independently verified. In addition, as a result of the COVID-19 pandemic, our total addressable market may be more difficult to estimate as the assumptions and forecasts on which we and third-parties have based estimates may not reflect future trends. Even if the market in which we compete meets the size estimates and growth we forecast, our business could fail to grow at similar rates, if at all.
Our management team has limited experience managing a public company.
Our chief executive officer has limited experience managing a public company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. While our chief financial officer and certain other executives have such experience, our management team, as a whole, may not successfully or efficiently manage the ongoing transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management, particularly from our chief executive officer, and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, operating results and financial condition.
We are exposed to fluctuations in currency exchange rates.
We face exposure to movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. Our operating results could be negatively affected depending on the amount of expense denominated in foreign currencies. As exchange rates vary, revenue, cost of revenue, operating expenses and other operating results, when re-measured, may differ materially from expectations.   For example, a significant portion of our international revenue is derived from Europe including the United Kingdom. Our revenues and cash flows from these regions may be adversely affected as a result of weakness in the Euro or British Pound. In addition, our operating results are subject to fluctuation if our mix of U.S. and foreign currency denominated transactions and expenses changes in the future. Although in the future we may apply certain strategies to mitigate foreign currency risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications. Additionally, as we anticipate growing our business further outside of the United States, the effects of movements in currency exchange rates will increase as our transaction volume outside of the United States increases.
Our new credit facility contains restrictive covenants that may limit our operating flexibility.
On March 11, 2020, we replaced our existing revolving credit facility by entering into a new credit facility. Our new credit facility contains restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens and enter into new businesses. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lender or terminate the new credit facility, which may limit our operating flexibility. In addition, our new credit facility is secured by all of our assets, and requires us to satisfy certain financial covenants. There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt. Any inability to make scheduled payments or meet the financial covenants on our new credit facility would adversely affect our business.
Loans under our new credit facility bear interest, at our option, at an annual rate based on LIBOR (or any such successor benchmark rate) or a base rate. It is unclear whether LIBOR will continue to exist after 2021 and it is not possible to predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of any successor benchmark rates on our new credit facility or our business generally. As a result, our interest costs could increase and our access to capital could change, which could adversely affect our results of operations and cash flows.
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We may require additional capital to support our business, and this capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business and may require additional funds. In particular, we may seek additional funds to develop new features and enhance our existing features, expand our operations, including our sales and marketing organizations and our presence outside of the United States, expand office space including into new facilities, improve our infrastructure or acquire complementary businesses, technologies, services, features and other assets. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth, scale our infrastructure, develop feature enhancements and respond to business challenges could be significantly impaired, and our business, operating results and financial condition may be adversely affected.
Risks Related to Laws, Regulation and Taxation
We are subject to general litigation that may ma