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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, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from                  to                 
Commission File Number: 001-38056
YEXT, INC.
(Exact name of registrant as specified in its charter)
yext-20221031_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, 2022, the registrant had 122,098,247 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 coronavirus (“COVID-19”) pandemic and its variants, including the effect of governmental restrictions and regulations as well as precautionary measures undertaken by businesses, on our business, operations, and financial results and the business and operations of our customers and potential customers;
our beliefs, objectives and strategies for future operations, including plans to invest in international expansion, research and development, and our sales and marketing teams, and the impact of such investments on our operations;
changes in management and anticipated effects thereof;
our ability to increase sales of our products;
maintaining and expanding our end-customer base and our relationships with our Knowledge Network; and
sufficiency of cash to meet cash needs for at least the next 12 months.
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, whether written or oral, except as required by law.
In this Quarterly Report on Form 10-Q, the words “we,” “us,” “our” and “Yext” refer to Yext, Inc. and its wholly owned subsidiaries, unless the context requires otherwise.

4


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
YEXT, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
October 31, 2022 January 31, 2022
Assets
Current assets:
Cash and cash equivalents
$ 162,268  $ 261,210 
Accounts receivable, net of allowances of $995 and $2,042, respectively
68,027  101,607 
Prepaid expenses and other current assets
14,887  13,538 
Costs to obtain revenue contracts, current
30,368  33,998 
Total current assets
275,550  410,353 
Property and equipment, net
65,308  74,604 
Operating lease right-of-use assets
86,617  97,124 
Costs to obtain revenue contracts, non-current
20,619  27,286 
Goodwill
4,235  4,572 
Intangible assets, net
199  217 
Other long term assets
3,578  6,179 
Total assets
$ 456,106  $ 620,335 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities
$ 48,252  $ 48,432 
Unearned revenue, current
153,267  223,427 
Operating lease liabilities, current
17,847  18,845 
Total current liabilities
219,366  290,704 
Operating lease liabilities, non-current
102,613  113,776 
Other long term liabilities
4,276  3,985 
Total liabilities
326,255  408,465 
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 50,000,000 shares authorized at October 31, 2022 and January 31, 2022; zero shares issued and outstanding at October 31, 2022 and January 31, 2022
—  — 
Common stock, $0.001 par value per share; 500,000,000 shares authorized at October 31, 2022 and January 31, 2022; 141,658,521 and 137,662,320 shares issued at October 31, 2022 and January 31, 2022, respectively; 122,747,392 and 131,156,986 shares outstanding at October 31, 2022 and January 31, 2022, respectively
141  137 
Additional paid-in capital
886,185  834,429 
Accumulated other comprehensive loss
(6,751) (187)
Accumulated deficit
(668,744) (610,604)
Treasury stock, at cost
(80,980) (11,905)
Total stockholders’ equity
129,851  211,870 
Total liabilities and stockholders’ equity
$ 456,106  $ 620,335 
See the accompanying notes to the condensed consolidated financial statements.
5


YEXT, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)

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



6


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

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

1. Organization and Description of Business
Description of Business
Yext, Inc. ("Yext" or the "Company") organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants. The Yext platform lets businesses structure the facts about their brands in a database called the Knowledge Graph. The platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which the Company refers to as its Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. The Yext platform powers all of the Company's key features, including Listings, Pages, and Answers, along with its other features and capabilities.
Fiscal Year
The Company's fiscal year ends on January 31st. References to fiscal 2023, for example, are to the fiscal year ending January 31, 2023.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 18, 2022 (the "Form 10-K"). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated balance sheet as of January 31, 2022, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results for the three and nine months ended October 31, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending January 31, 2023, or any other period.
There have been no material changes to the Company's significant accounting policies as described in the Form 10-K.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of those financial statements and the reported amounts of revenue and expense during the reporting period. These estimates include, but are not limited to, the standalone selling prices of performance obligations, the incremental borrowing rate associated with lease liabilities, the useful life of capitalized costs to obtain revenue contracts, income taxes, and the valuation and assumptions underlying stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.
Segment Information
The Company is the provider of the Yext platform and operates as one operating segment. An operating segment is defined as a component of an enterprise for which separate financial information is evaluated regularly by the chief operating decision makers ("CODM"). The Company defines its CODM as its executive officers, and their role is to make decisions about allocating resources and assessing performance. The Company's business operates as one operating segment as all of the Company's offerings operate on the Yext platform and are deployed in an identical way, with its CODM evaluating the Company's financial information, resources and performance of these resources on a consolidated basis. Since the Company operates as one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.
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Concentration of Credit Risk
Certain financial instruments that could be exposed to a concentration of credit risk include cash and cash equivalents and accounts receivable. The Company deposits its cash with financial institutions, and such deposits, at times, may exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents to date. Collateral is not required for accounts receivable. At October 31, 2022 and January 31, 2022, no single customer accounted for more than 10% of the Company's accounts receivable. No single customer accounted for more than 10% of the Company's revenue for the three and nine months ended October 31, 2022 and 2021, respectively.
Marketable Securities
The Company's investments in marketable securities may consist of debt securities, including U.S. treasury securities, corporate bonds, and commercial paper. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. The Company considers all of its investments in marketable securities, irrespective of the maturity date, as available for use in current operations, and therefore classifies these securities within current assets on the condensed consolidated balance sheets. All marketable securities are carried at estimated fair value. Credit losses related to marketable securities are recorded, net in the condensed consolidated statements of operations and comprehensive loss through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. As of October 31, 2022 and January 31, 2022, no credit losses related to marketable securities were recorded by the Company. Any remaining unrealized gains or losses for marketable securities are included in accumulated other comprehensive income (loss), as a component of stockholders’ equity.
Recent Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts, provided such contracts had been appropriately accounted for under ASC 606 by the acquiree, rather than recognizing them at their estimated fair value on the acquisition date as required under the existing guidance. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 on a prospective basis, with early adoption permitted. This standard is effective for the Company in fiscal year 2024. We do not expect the adoption of this standard to have a significant impact on its consolidated financial statements.
3. Revenue
Performance Obligations
The Company has identified that it has two distinct performance obligations: subscription and associated support to the Yext platform and professional services. The Company's revenue is predominantly related to its subscription and associated support to the Yext platform. Professional services revenue accounted for approximately 9% and 8% of the Company's total revenue for the nine months ended October 31, 2022 and 2021, respectively.
Geographic Region
The Company disaggregates its revenue from contracts with customers by geographic region, as it believes this best depicts how the nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors. Revenue by geographic region is determined based on the region of the Company's contracting entity, which may be different than the region of its customers. The following table presents the Company's revenue by geographic region:
Three months ended October 31, Nine months ended October 31,
(in thousands) 2022 2021 2022 2021
North America $ 80,826  $ 79,083  $ 240,617  $ 229,782 
International 18,454  20,446  58,334  59,863 
Total revenue $ 99,280  $ 99,529  $ 298,951  $ 289,645 
North America revenue is attributable to the United States. International revenue is predominantly attributable to European countries, but also includes Japan.
The Company's revenue attributable to the United States represented 80% of total revenue, revenue attributable to England, which serves as the Company's main contracting entity for Europe, represented 18% of total revenue, and no other individual country represented more than 10% of total revenue for the nine months ended October 31, 2022.
The Company's revenue attributable to the United States represented 79% of total revenue, revenue attributable to England, which serves as the Company's main contracting entity for Europe, represented 19% of total revenue, and no other individual country represented more than 10% of total revenue for the nine months ended October 31, 2021.
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Contract Liabilities
A contract liability is an obligation to transfer goods or services for which consideration has been received or is due to a customer. The Company's contract liabilities consist primarily of unearned revenue and, to a lesser extent, customer deposits.
As of October 31, 2022, unearned revenue, current was $153.3 million, while unearned revenue, non-current, which is included within other long term liabilities on the Company's condensed consolidated balance sheet, was $0.1 million. Revenue recognized of $195.5 million during the nine months ended October 31, 2022 was included in unearned revenue at the beginning of the period.
Customer deposits represent payments received in advance in instances where a revenue contract is cancelable in nature, and therefore the Company does not have an unconditional obligation to transfer control to a customer. As of October 31, 2022 and January 31, 2022, customer deposits of $0.6 million and $0.2 million were included in accounts payable, accrued expenses and other current liabilities on the Company's condensed consolidated balance sheet, respectively.
Remaining Performance Obligations
The transaction price allocated to remaining performance obligations represents amounts under non-cancelable contracts expected to be recognized as revenue in future periods, and may be influenced by several factors, including seasonality, the timing of renewals, and contract terms. As of October 31, 2022, the Company had $365.4 million of remaining performance obligations, of which $312.8 million is expected to be recognized as revenue over the next twenty-four months, with the remaining balance expected to be recognized thereafter. As of January 31, 2022, the Company had $404.9 million of remaining performance obligations.
4. Investments in Marketable Securities
The following tables summarize the Company's investments in marketable securities:
October 31, 2022
(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Money market funds $ 83,339  $ —  $ —  $ 83,339 
U.S. treasury securities 24,495  —  (16) 24,479 
Total marketable securities $ 107,834  $ —  $ (16) $ 107,818 
January 31, 2022
(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Money market funds $ 138,470  $ —  $ —  $ 138,470 
U.S. treasury securities —  —  —  — 
Total marketable securities $ 138,470  $ —  $ —  $ 138,470 

As of October 31, 2022 and January 31, 2022, the Company's marketable securities have a maturity of 90 days or less and are classified as cash and cash equivalents. During the three and nine months ended October 31, 2022 and 2021, the Company had no material reclassification adjustments from accumulated other comprehensive loss to net loss.
The Company classifies interest income on investments in marketable securities, amortization of premiums and discounts, and realized gains and losses on securities available for sale within interest income in the condensed consolidated statements of operations and comprehensive loss.
The Company regularly reviews its debt securities and monitors the surrounding economic conditions to assess the risk of expected credit losses. As of October 31, 2022 and January 31, 2022, the unrealized losses and the related risk of expected credit losses were not significant.
5. Fair Value of Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive (loss) income when they occur. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the assets or liabilities, such as inherent risk, transfer restrictions, and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
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Level 1 inputs are based on quoted prices in active markets for identical assets or liabilities. 
Level 2 inputs are based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. 
Level 3 inputs are based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities, and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability.

The Company's assets measured at fair value on a recurring basis, by level, within the fair value hierarchy are as follows:
October 31, 2022
(in thousands) Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 83,339  $ —  $ —  $ 83,339 
U.S. treasury securities (1)
—  24,479  —  24,479 
Included in cash and cash equivalents $ 83,339  $ 24,479  $ —  $ 107,818 
January 31, 2022
(in thousands) Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 138,470  $ —  $ —  $ 138,470 
U.S. treasury securities (1)
—  —  —  — 
Included in cash and cash equivalents $ 138,470  $ —  $ —  $ 138,470 
(1) The Company's U.S. treasury securities purchased with an original maturity of less than three months from the purchase date are classified as cash and cash equivalents on its condensed consolidated balance sheet.
The Company’s cash equivalents and marketable securities for the periods presented were valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs and were classified as Level 1 or Level 2, accordingly.
6. Goodwill
As of October 31, 2022 and January 31, 2022, the Company had goodwill of $4.2 million and $4.6 million, respectively. The changes to goodwill during these periods relate to foreign currency.
Goodwill is not amortized but is subject to periodic testing for impairment at the reporting unit level, which is at or one level below the operating segment level. The Company operates as one operating segment, which represents its one reporting unit. The test for impairment is conducted annually each November 1st, or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
The Company determined that no events occurred or circumstances changed that would more likely than not reduce the fair value of the Company's reporting unit below its carrying amount during the nine months ended October 31, 2022 and 2021. However, if certain events occur or circumstances change, it may be necessary to record impairment charges in the future.
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7. Property and Equipment, Net
Property and equipment are recorded at cost and depreciated or amortized on a straight-line basis over their estimated useful lives. Property and equipment, net consisted of the following:
(in thousands) October 31, 2022 January 31, 2022
Computer software $ 20,335  $ 18,814 
Office equipment 21,155  18,854 
Furniture and fixtures 8,368  8,163 
Leasehold improvements 62,662  62,784 
Construction in progress 35  936 
Software in progress 1,075  1,342 
Total property and equipment, gross 113,630  110,893 
Less: accumulated depreciation (48,322) (36,289)
Total property and equipment, net $ 65,308  $ 74,604 
As of October 31, 2022 and January 31, 2022, the Company's property and equipment, net attributable to the United States was 89% and 90%, respectively. No other individual country represented more than 10% of the total property and equipment, net as of those periods. Depreciation expense was $4.4 million and $13.1 million for the three and nine months ended October 31, 2022, respectively and $4.4 million and $12.0 million for the three and nine months ended October 31, 2021, respectively.
8. Accounts Payable, Accrued Expenses and Other Current Liabilities
        Accounts payable, accrued expenses and other current liabilities consisted of the following:
(in thousands) October 31, 2022 January 31, 2022
Accounts payable $ 4,758  $ 9,218 
Accrued employee compensation 21,450  17,589 
Accrued Knowledge Network application provider fees 3,152  2,885 
Accrued professional services and associated costs 2,107  2,663 
Accrued employee stock purchase plan withholdings liability 530  2,397 
Other current liabilities 16,255  13,680 
Total accounts payable, accrued expenses and other current liabilities $ 48,252  $ 48,432 
As of October 31, 2022 and January 31, 2022, capital expenditures of $0.2 million and $0.9 million were included in accounts payable, accrued expenses and other current liabilities, respectively.
9. Stock-Based Compensation
2008 Equity Incentive Plan
        The Company's 2008 Equity Incentive Plan (the "2008 Plan"), as amended on March 10, 2016, allowed for the issuance of up to 25,912,531 shares of common stock. Awards granted under the 2008 Plan may be incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), restricted stock and restricted stock units. The 2008 Plan is administered by the Company's Board of Directors, which determines the terms of the options granted, the exercise price, the number of shares subject to option and the option vesting period. No ISO or NQSO is exercisable after 10 years from the date of grant, and option awards will typically vest over a four-year period.
        The 2008 Plan was terminated in connection with the adoption of the Company's 2016 Equity Incentive Plan (the "2016 Plan") in December 2016, and since the 2008 Plan termination the Company has not granted and will not grant any additional awards under the 2008 Plan. However, the 2008 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder.
2016 Equity Incentive Plan
        In December 2016, the Company's Board of Directors adopted, and its stockholders approved, the 2016 Plan. The number of shares reserved for issuance under the 2016 Plan will increase on the first day of each fiscal year during the term of the 2016 Plan by the lesser of: (i) 10,000,000 shares, (ii) 4% of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company's Board of Directors may determine. On February 1, 2022, the number of shares of common stock available for issuance under the 2016 Plan was automatically increased according to its terms by 5,246,279 shares. In addition, the shares reserved for issuance under the 2016 Plan also include shares returned to the 2008 Plan as the result of
13


expiration or termination of options or other awards. As of October 31, 2022, the number of shares available for future award under the 2016 Plan is 3,898,183.
Stock Options
       The following table summarizes the activity related to the Company's stock options:
Outstanding Stock Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (in years) Aggregate Intrinsic Value
(in thousands)
Balance, January 31, 2022
6,620,701  $ 7.28  4.32 $ 11,723 
Granted —  $ — 
Exercised (207,623) $ 2.57 
Forfeited or canceled (1,722,245) $ 10.16 
Balance, October 31, 2022
4,690,833  $ 6.43  3.35 $ 1,708 
Vested and expected to vest 4,690,833  $ 6.43  3.35 $ 1,708 
Exercisable at October 31, 2022
4,690,833  $ 6.43  3.35 $ 1,708 
The aggregate intrinsic value of options vested and expected to vest and exercisable is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of October 31, 2022. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.
The aggregate intrinsic value of exercised options was $0.7 million and $11.6 million for the nine months ended October 31, 2022 and 2021, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.
Restricted Stock and Restricted Stock Units
        The following table summarizes the activity related to the Company's restricted stock and restricted stock units:
Outstanding Weighted-Average Grant Date Fair Value
Balance as of January 31, 2022
10,184,214  $ 14.38 
Granted 7,955,218  $ 6.33 
Vested and converted to shares (3,398,302) $ 14.00 
Forfeited or canceled (3,073,625) $ 12.86 
Balance as of October 31, 2022
11,667,505  $ 8.84 
The estimated weighted-average grant date fair value of restricted stock and restricted stock units granted was $6.33 and $13.22 per share for the nine months ended October 31, 2022 and 2021, respectively. The fair value of the common stock is the Company’s closing stock price as reported on the New York Stock Exchange.
Employee Stock Purchase Plan
In March 2017, the Company's Board of Directors adopted, and its stockholders approved, the 2017 Employee Stock Purchase Plan ("ESPP"), which became effective on the date it was adopted. The number of shares of the Company's common stock that will be available for sale to employees under the ESPP increases annually on the first day of each fiscal year in an amount equal to the lesser of: (i) 2,500,000 shares; (ii) 1% of the outstanding shares of the Company's common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the administrator may determine. On February 1, 2022, the number of shares of common stock available for issuance under the ESPP was automatically increased according to its terms by 1,311,569 shares. As of October 31, 2022, a total of 4,058,651 shares of the Company's common stock are available for sale to employees under the ESPP.
In connection with the offering period which ended on March 15, 2022, 457,595 shares of common stock were purchased under the ESPP at a purchase price of $5.14 per share for total proceeds of $2.4 million. In connection with the offering period which ended on September 15, 2022, 339,019 shares of common stock were purchased under the ESPP at a purchase price of $4.31 per share for total proceeds of $1.5 million.
A new offering period began on September 15, 2022 and will end on March 15, 2023. As of October 31, 2022, 478,607 shares are estimated to be purchased at the end of the offering period and $0.5 million has been withheld on behalf of employees for these future purchases under the ESPP and is included in accounts payable, accrued expenses and other current liabilities.
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The Black-Scholes option pricing model assumptions used to calculate the fair value of shares, estimated at commencement, to be purchased during an ESPP offering period were as follows:
Three months ended October 31, Nine months ended October 31,
2022 2021 2022 2021
Expected life (years) 0.50 0.50 0.50 0.50
Expected volatility 63.52% 45.54%
48.87% - 63.52%
45.54% - 59.24%
Dividend yield
Risk-free rate 3.78% 0.05%
0.86% - 3.78%
0.05% - 0.06%
The expected life assumptions were based on each offering period's respective purchase date. The Company estimated the expected volatility assumption based on the historical volatility of its stock price. The risk-free rate assumptions were based on the U.S. treasury yield curve in effect at commencement of the offering period. The dividend yield assumption was zero as the Company has not historically paid any dividends and does not expect to declare or pay any dividends in the foreseeable future.
During the three and nine months ended October 31, 2022, the Company recorded stock-based compensation expense associated with the ESPP of $0.3 million and $1.0 million, respectively and $0.5 million and $1.6 million for the three and nine months ended October 31, 2021, respectively. As of October 31, 2022, total unrecognized compensation cost related to ESPP was $0.6 million, net of estimated forfeitures, which will be amortized over a weighted-average remaining period of 0.37 years.
A new offering period commences on the first trading day on or after March 15th and September 15th each year, or on such other date as the administrator will determine, and will end on the first trading day, approximately six months later, on or after September 15th and March 15th, respectively. Participants may purchase the Company’s common stock through payroll deductions, up to a maximum of 15% of their eligible compensation. Unless changed by the administrator, the purchase price for each share of common stock purchased under the ESPP will be 85% of the lower of the fair market value per share on the first trading day of the applicable offering period or the fair market value per share on the last trading day of the applicable offering period.
Performance-based Restricted Stock Units
In March 2022, the Company made a grant to an executive in the form of 2,000,000 performance-based restricted stock units. This grant was outside of the Company’s 2016 Equity Incentive Plan. These performance-based restricted stock units are subject to the achievement of certain stock price targets. The Company uses a Monte Carlo simulation model to determine the fair value of this award and recognizes expense using the accelerated attribution method over the requisite service period.
Stock-Based Compensation Expense
        Stock-based compensation represents the cost related to stock-based awards granted in lieu of monetary payment. The Company measures stock-based compensation associated with stock-based awards issued to employees at the grant date, based on the estimated fair value of the award, and recognizes expense, net of estimated forfeitures, over the vesting period of the applicable award generally using the straight-line method.
The Company's stock-based compensation expense for the periods presented was as follows:
Three months ended October 31, Nine months ended October 31,
(in thousands) 2022 2021 2022 2021
Cost of revenue $ 1,176  $ 1,840  $ 3,899  $ 5,597 
Sales and marketing 5,432  6,757  17,957  19,635 
Research and development 3,946  5,469  12,668  15,285 
General and administrative 4,268  5,389  14,466  13,938 
Total stock-based compensation expense $ 14,822  $ 19,455  $ 48,990  $ 54,455 
During the three and nine months ended October 31, 2022, the Company capitalized $0.1 million and $0.4 million, respectively of stock-based compensation related to software development, and $0.2 million and $1.2 million for the three and nine months ended October 31, 2021, respectively.

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



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


The following table summarizes the changes in stockholders' equity during the nine months ended October 31, 2021:
Accumulated
Additional Other Total
Common Stock Paid-In Comprehensive Accumulated Treasury Stockholders’
(in thousands) Shares Amount Capital Income Deficit Stock Equity
Balance, January 31, 2021
123,989  $ 130  $ 733,933  $ 2,422  $ (517,345) $ (11,905) $ 207,235 
Exercise of stock options 1,069  12,110  —  —  —  12,111 
Vested restricted stock units converted to common shares 871  (1) —  —  —  — 
Issuance of restricted stock —  —  —  —  —  — 
Issuance of common stock under employee stock purchase plan 282  —  3,817  —  —  —  3,817 
Stock-based compensation —  —  15,288  —  —  —  15,288 
Other comprehensive income —  —  —  355  —  —  355 
Net loss —  —  —  —  (17,631) —  (17,631)
Balance, April 30, 2021
126,215  132  765,147  2,777  (534,976) (11,905) 221,175 
Exercise of stock options 402  2,273  —  —  —  $ 2,274 
Vested restricted stock units converted to common shares 1,172  (1) —  —  —  $ — 
Issuance of restricted stock 11  —  —  —  —  —  $ — 
Stock-based compensation —  —  20,730  —  —  —  $ 20,730 
Other comprehensive loss —  —  —  (8) —  —  $ (8)
Net loss —  —  —  —  (27,592) —  $ (27,592)
Balance, July 31, 2021
127,800  134  788,149  2,769  (562,568) (11,905) 216,579 
Exercise of stock options 357  —  2,641  —  —  —  $ 2,641 
Vested restricted stock units converted to common shares 1,267  (1) —  —  —  $ — 
Issuance of common stock under employee stock purchase plan 249  2,667  —  —  —  $ 2,668 
Stock-based compensation —  —  19,637  —  —  —  $ 19,637 
Other comprehensive loss —  —  —  (1,586) —  —  $ (1,586)
Net loss —  —  —  —  (24,926) —  $ (24,926)
Balance, October 31, 2021
129,673  $ 136  $ 813,093  $ 1,183  $ (587,494) $ (11,905) $ 215,013 

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, 2022 and January 31, 2022, no shares of preferred stock were issued or outstanding.
Common Stock
        As of October 31, 2022 and January 31, 2022, 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.
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Treasury Stock
 As of October 31, 2022, the Company had 18,911,129 shares of treasury stock carried at its cost basis of $81.0 million. As of January 31, 2022, the Company had 6,505,334 shares of treasury stock carried at its cost basis of $11.9 million.
Share Repurchase Program
In March 2022, the Company's Board of Directors authorized a $100.0 million share repurchase program of the Company’s common stock. As of October 31, 2022, a total of 12,405,795 shares have been purchased at an average price of $5.57 per share for a total cost of $69.1 million since the commencement of the share repurchase program. As of October 31, 2022, there was approximately $30.9 million that remained available to be purchased under this share repurchase program.
As part of the share repurchase program, shares may be purchased in open market transactions or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing, manner, price and amount of any repurchases will be determined at the Company’s discretion, and the share repurchase program may be suspended, terminated or modified at any time for any reason. The repurchase program does not obligate the Company to acquire any specific number of shares, and all open market repurchases will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases.
11. Debt
On March 11, 2020, the Company entered into a credit agreement with Silicon Valley Bank (the “Credit Agreement”). No significant debt issuance costs were incurred in association with the Credit Agreement. In January 2021, the Company amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors.
The 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 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 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 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 October 31, 2022, the Company was in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $35.9 million available and $14.1 million in letters of credit allocated as security in connection with office space.
12. 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, 2022, the Company recorded a (provision for) benefit from income taxes of $(0.4) million and $(1.4) million, respectively. During the three and nine months ended October 31, 2021, 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 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 in the future and would result in a non-cash income tax benefit in the period of release.
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13. Leases
The Company's operating lease arrangements are principally for office space. As of October 31, 2022, the Company had $17.8 million of operating lease liabilities, current, $102.6 million of operating lease liabilities, non-current, $86.6 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 8.1 years and a weighted-average discount rate of 6.1%, as of October 31, 2022. During the nine months ended October 31, 2022, the Company paid $13.7 million for amounts included in the measurement of lease liabilities and did not enter into any new lease arrangements.
During the nine months ended October 31, 2022 and 2021 the Company recognized $20.1 million and $19.9 million, of lease expense, respectively, which consisted of the following:
Nine months ended October 31,
(in thousands) 2022 2021
Operating lease expense $ 12,260  $ 12,723 
Short-term lease expense 606  545 
Variable lease expense 7,278  6,663 
Total lease expense $ 20,144  $ 19,931 
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. 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 includes real estate taxes and utilities, among other office space related expenses.
14. 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, although some have a term of several years, 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 2023 and 2035.
        As of October 31, 2022, the Company's contractual obligations are as follows (in thousands):
Fiscal year ending January 31: Operating Leases Other
2023 (remainder of fiscal year)
$ 4,730  $ 16,012 
2024 18,521  17,418 
2025 18,039  9,752 
2026 18,979  1,833 
2027 19,073  1,537 
2028 and thereafter 74,700  387 
Total $ 154,042  $ 46,939 
Legal Proceedings
Menzione v. Yext, Inc., et al., No. 1:22-cv-05127 (S.D.N.Y.)
On June 17, 2022, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York by a purported purchaser of Company securities. The complaint names the Company, its former Chief Executive Officer (Howard Lerman), and its former Chief Financial Officer (Steven Cakebread) as defendants. The complaint alleges that the defendants purportedly made false and/or misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects, including information regarding the effects of the COVID-19 pandemic on the Company. The purported class includes all persons and entities that purchased or acquired our securities between March 4, 2021 and March 8, 2022. The complaint seeks monetary damages for alleged securities law violations. Motions for appointment as lead plaintiff and lead counsel were filed on August 16, 2022. On September 6, 2022, the court appointed the Operating Engineers Construction Industry and Miscellaneous Pension Fund to be lead plaintiff (“Lead Plaintiff”) for the purported class, and Robbins Gellar Rudman & Dowd LLP to be lead counsel for the purported class. On September 27, 2022, the court ordered a schedule for the filing of an amended complaint, and an answer or motion to dismiss briefing. On November 28, 2022, Lead Plaintiff filed a voluntary dismissal of the complaint, without prejudice.
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In addition to the litigation described above, 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.
15. 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) 2022 2021 2022 2021
Numerator:
     Net loss attributable to common stockholders $ (12,310) $ (24,926) $ (58,140) $ (70,149)
Denominator:
     Weighted-average common shares outstanding 123,500,961 128,570,237 126,239,773 126,967,336
Net loss per share attributable to common stockholders, basic and diluted $ (0.10) $ (0.19) $ (0.46) $ (0.55)
        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,
2022 2021
Options to purchase common stock 4,690,833  7,031,266 
Restricted stock and restricted stock units 11,667,505  10,912,675 
Shares estimated to be purchased under ESPP 478,607  282,162 
Performance-based restricted stock units 2,000,000  — 
Total anti-dilutive common equivalent shares 18,836,945  18,226,103 





20


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, 2022, filed with the SEC on March 18, 2022. 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, 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 organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants. Our platform lets businesses structure the facts about their brands in a database called the Knowledge Graph. Our platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which we refer to as our Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. Our 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 to customers of all sizes, including our enterprise, mid-size, and 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 2023, for example, are to the fiscal year ending January 31, 2023.
COVID-19 Update
The COVID-19 pandemic has significantly disrupted business operations for us and our customers, as well as suppliers, and other parties with whom we do business. Such disruptions are expected to continue for an indefinite period of time.
We have adopted several measures in response to the COVID-19 pandemic and continue to monitor regional developments to inform our operational decisions. Our offices have been open on a voluntary basis in accordance with guidance provided by government agencies, although currently the majority of our employees are still working remotely. While we continue to hold virtual events, we have also resumed in-person marketing events. The uncertain duration of these measures have had and may continue to have negative effects on our sales efforts and revenue growth rates. We continue to be committed to our business, the strength of our platform, our ability to continue to execute on our strategy, and our efforts to support our customers.
We may continue to see some existing and potential customers, in particular customers in industries and geographies that have been highly impacted by the pandemic, 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 which could materially adversely impact our business, financial condition and results of operations in future periods. The ultimate extent of the impact of the pandemic 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 its variants, vaccination rates and efficacy and the actions taken to contain and address the impact of the pandemic, 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 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.
Key Metrics
We monitor the following key operational and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
Customer Count
Customer count is defined as the total number of customers with contracts executed as of the last day of the reporting period and a unique administrative account identifier on our platform. Generally, we assign unique administrative accounts to each separate and distinct entity (such as a company or government institution) or a business unit of a large corporation, that has its own separate contract with us to access our platform. We believe that customer count provides insight into our ability to grow our enterprise and mid-market customer base. As such, customer count excludes third-party reseller customers and small business customers as well as customers only receiving free trials. As of October 31, 2022, customer count increased 6% year-over-year to approximately 2,900.
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Annual Recurring Revenue ("ARR")
Annual recurring revenue, or ARR, for Direct customers is defined as the annualized recurring amount of all contracts in our enterprise, mid-market and small business customer base as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription. Contracts include portions of professional services contracts that are recurring in nature.
ARR for Third-party Reseller customers is defined as the annualized recurring amount of all contracts with Third-party Reseller customers as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription. The calculation includes the annualized contractual minimum commitment and excludes amounts related to overages above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature. See Part II Item 1A “Risk Factors" for further discussion of Third-party reseller customers.
Total ARR is defined as the annualized recurring amount of all contracts executed as of the last day of the reporting period. The recurring amount of a contract is determined based upon the terms of a contract and is calculated by dividing the amount of a contract by the term of the contract and then annualizing such amount. The calculation assumes no subsequent changes to the existing subscription, and where relevant, includes the annualized contractual minimum commitment and excludes amounts related to overages above the contractual minimum commitment. Contracts include portions of professional services contracts that are recurring in nature.
ARR is independent of historical revenue, unearned revenue, remaining performance obligations or any other GAAP financial measure over any period. It should be considered in addition to, not as a substitute for, nor superior to or in isolation from, these measures and other measures prepared in accordance with GAAP. We believe ARR-based metrics provides insight into the performance of our recurring revenue business model while mitigating for fluctuations in billing and contract terms.
October 31, Variance
2022 2021 Dollars Percent
Annual Recurring Revenue
Direct Customers $ 317,280  $ 308,197  $ 9,083  %
Third-Party Reseller Customers 72,258  78,457  (6,199) (8) %
Total Annual Recurring Revenue $ 389,538  $ 386,654  $ 2,884  %

Oct. 31, 2022 Jul. 31, 2022 Apr. 30, 2022 Jan. 31, 2022 Oct. 31, 2021
Annual Recurring Revenue Trend
Direct Customers $ 317,280  $ 312,129  $ 310,312  $ 312,132  $ 308,197 
Third-Party Reseller Customers 72,258  74,857  76,671  78,353  78,457 
Total Annual Recurring Revenue $ 389,538  $ 386,986  $ 386,983  $ 390,485  $ 386,654 
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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 or capacity purchased by 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, as well as the costs associated with our data centers. In addition, cost of revenue includes 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 lease expenses associated with our office spaces, which are allocated based on employee headcount. In addition, cost of revenue includes software expense, which relates to licenses, professional services, and other costs associated with software for use in the operations of our business, which is also 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 lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount. In addition, sales and marketing expenses include costs related to advertising and conferences and brand awareness events.
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 lease expenses associated with our office spaces, as well as software expense, each of 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 lease expenses associated with our office spaces, as well as software expense, each of 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) 2022 2021 2022 2021
Revenue
$ 99,280  $ 99,529  $ 298,951  $ 289,645 
Cost of revenue(1)
25,663  25,255  77,473  73,724 
 Gross profit
73,617  74,274  221,478  215,921 
Operating expenses:
 Sales and marketing(1)
49,360  58,548  164,244  172,292 
 Research and development(1)
17,649  17,986  53,770  50,343 
 General and administrative(1)
18,740  22,094  60,619  61,284 
 Total operating expenses
85,749  98,628  278,633  283,919 
Loss from operations (12,132) (24,354) (57,155) (67,998)
Interest income 587  797  15 
Interest expense (211) (113) (483) (403)
Other (expense) income, net (156) (191) 111  (1,018)
Loss from operations before income taxes
(11,912) (24,653) (56,730) (69,404)
(Provision for) benefit from income taxes (398) (273) (1,410) (745)
Net loss
$ (12,310) $ (24,926) $ (58,140) $ (70,149)
(1)Amounts include stock-based compensation expense as follows:
Three months ended October 31, Nine months ended October 31,
(in thousands) 2022 2021 2022 2021
Cost of revenue $ 1,176  $ 1,840  $ 3,899  $ 5,597 
Sales and marketing 5,432  6,757  17,957  19,635 
Research and development 3,946  5,469  12,668  15,285 
General and administrative 4,268  5,389  14,466  13,938 
Total stock-based compensation expense $ 14,822  $ 19,455  $ 48,990  $ 54,455 
Decreases in stock-based compensation expense are largely due to decreases in the fair value of awards granted.
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,
2022 2021 2022 2021
Revenue 100  % 100  % 100  % 100  %
Cost of revenue 26  25  26  26 
 Gross profit 74.2  74.6  74.1  74.5 
Operating expenses:
 Sales and marketing 50  59  55  60 
 Research and development 17  18  18  17 
 General and administrative 19  22  20  21 
 Total operating expenses 86  99  93  98 
Loss from operations (12) (24) (19) (24)
Interest income —  —  —  — 
Interest expense —  —  —  — 
Other (expense) income, net —  (1) —  — 
Loss from operations before income taxes (12) (25) (19) (24)
(Provision for) benefit from income taxes —  —  —  — 
Net loss (12) % (25) % (19) % (24) %
Note: Numbers rounded for presentation purposes and may not sum.

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Three Months Ended October 31, 2022 Compared to Three Months Ended October 31, 2021
Revenue
Three months ended October 31, Variance
(in thousands) 2022 2021 Dollars Percent
 Revenue
$ 99,280  $ 99,529  $ (249) —  %
 Cost of revenue
25,663  25,255  $ 408  %
 Gross profit
$ 73,617  $ 74,274  $ (657) (1) %
 Gross margin
74.2  % 74.6  %
Total revenue was $99.3 million for the three months ended October 31, 2022, compared to $99.5 million for the three months ended October 31, 2021, a decrease of $0.2 million or 0%, primarily driven by foreign currency exchange rates. Revenue for the three months ended October 31, 2022, included a negative impact from foreign currency exchange rates of approximately $3.7 million, using a constant currency basis. Revenue on a constant currency basis grew 4%, compared to the three months ended October 31, 2021, primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. We calculate constant currency by translating our current period results for entities reporting in currencies other than U.S. Dollars (“USD”) into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period.
For the three months ended October 31, 2022 and 2021, revenue recognized from subscriptions and associated support to our platform was 91% and revenue recognized from professional services was 9%, compared to 92% and 8%, respectively.
The following table summarizes our revenue by sales channel for the periods presented:
Three months ended October 31, Variance
2022 2021 Dollars Percent
(in thousands)
Direct Customers $ 78,900  $ 77,316  $ 1,584  %
Third-Party Reseller Customers 20,380  22,213  (1,833) (8) %
Total Revenue $ 99,280  $ 99,529  $ (249) —  %
Revenue attributable to direct customers was $78.9 million for the three months ended October 31, 2022, compared to $77.3 million for the three months ended October 31, 2021. The increase of $1.6 million or 2%, was primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. Revenue attributable to third-party reseller customers was $20.4 million for the three months ended October 31, 2022, compared to $22.2 million for the three months ended October 31, 2021, a decrease of $1.8 million or 8%, primarily due to customer attrition.
Cost of Revenue and Gross Margin
Cost of revenue was $25.7 million for the three months ended October 31, 2022, relatively consistent compared to $25.3 million for the three months ended October 31, 2021. The increase of $0.4 million or 2% was primarily driven by a $0.6 million increase in personnel-related costs, as well as a $0.5 million increase in costs associated with our data centers. These increases were partially offset by a $0.7 million decrease in stock-based compensation expense, largely due to decreases in the fair value of awards granted.
Gross margin was 74.2% for the three months ended October 31, 2022, compared to 74.6% for the three months ended October 31, 2021 as reflected in the discussion above.
Operating Expenses
Three months ended October 31, Variance
(in thousands) 2022 2021 Dollars Percent
 Sales and marketing $ 49,360  $ 58,548  $ (9,188) (16) %
 Research and development $ 17,649  $ 17,986  $ (337) (2) %
 General and administrative $ 18,740  $ 22,094  $ (3,354) (15) %
Sales and marketing expense was $49.4 million for the three months ended October 31, 2022, compared to $58.5 million for the three months ended October 31, 2021, a decrease of $9.2 million or 16%. The decrease was primarily driven by employee-related costs, as personnel-related costs decreased $4.6 million, reflecting lower headcount, and stock-based compensation expense which decreased $1.3 million, largely due to decreases in the fair value of awards granted. In addition, advertising costs decreased $1.3 million due to certain brand media campaigns in the prior period and professional related costs decreased $0.7 million.
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Research and development expense was $17.6 million for the three months ended October 31, 2022, relatively consistent compared to $18.0 million for the three months ended October 31, 2021, as decreases of $1.5 million in stock-based compensation expense, largely due to decreases in the fair value of awards granted, were partially offset by increases of $0.8 million in personnel-related costs.
General and administrative expense was $18.7 million for the three months ended October 31, 2022, compared to $22.1 million for the three months ended October 31, 2021, a decrease of $3.4 million or 15%. The decrease was primarily driven by employee-related costs, as stock-based compensation expense decreased $1.1 million, largely due to decreases in the fair value of awards granted, personnel-related costs decreased $1.0 million and professional related costs decreased $1.3 million.
Nine Months Ended October 31, 2022 Compared to Nine Months Ended October 31, 2021
Revenue
Nine months ended October 31, Variance
(in thousands) 2022 2021 Dollars Percent
 Revenue
$ 298,951  $ 289,645  $ 9,306  %
 Cost of revenue
77,473  73,724  $ 3,749  %
 Gross profit
$ 221,478  $ 215,921  $ 5,557  %
 Gross margin
74.1  % 74.5  %
Total revenue was $299.0 million for the nine months ended October 31, 2022, compared to $289.6 million for the nine months ended October 31, 2021, an increase of $9.3 million or 3%, primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. Revenue for the nine months ended October 31, 2022 included a negative impact from foreign currency exchange rates of approximately $7.9 million, using a constant currency basis. We calculate constant currency by translating our current period results for entities reporting in currencies other than USD into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period.
For the nine months ended October 31, 2022 and 2021, revenue recognized from subscriptions and associated support to our platform was 91% and revenue recognized from professional services was 9%, compared to 92% and 8%, respectively.
The following table summarizes our revenue by sales channel for the periods presented:
Nine months ended October 31, Variance
2022 2021 Dollars Percent
(in thousands)
Direct Customers $ 235,945  $ 224,324  $ 11,621  %
Third-Party Reseller Customers 63,006  65,321  (2,315) (4) %
Total Revenue $ 298,951  $ 289,645  $ 9,306  %
Revenue attributable to direct customers was $235.9 million for the nine months ended October 31, 2022, compared to $224.3 million for the nine months ended October 31, 2021. The increase of $11.6 million or 5%, was primarily driven by new customer subscriptions to our platform, as well as expanded subscriptions for existing customers. Revenue attributable to third-party reseller customers was $63.0 million for the nine months ended October 31, 2022, compared to $65.3 million for the nine months ended October 31, 2021, a decrease of $2.3 million or 4%, primarily due to customer attrition.
Cost of Revenue and Gross Margin
Cost of revenue was $77.5 million for the nine months ended October 31, 2022, compared to $73.7 million for the nine months ended October 31, 2021, an increase of $3.7 million or 5%. The increase was primarily driven by a $3.5 million increase in personnel-related costs, reflecting higher headcount, as well as a $1.5 million increase in costs associated with our data centers. These increases were partially offset by a $1.7 million decrease in stock-based compensation expense, largely due to decreases in the fair value of awards granted.
Gross margin was 74.1% for the nine months ended October 31, 2022, compared to 74.5% for the nine months ended October 31, 2021 as reflected in the discussion above.
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Operating Expenses
Nine months ended October 31, Variance
(in thousands) 2022 2021 Dollars Percent
 Sales and marketing $ 164,244  $ 172,292  $ (8,048) (5) %
 Research and development $ 53,770  $ 50,343  $ 3,427  %
 General and administrative $ 60,619  $ 61,284  $ (665) (1) %
Sales and marketing expense was $164.2 million for the nine months ended October 31, 2022, compared to $172.3 million for the nine months ended October 31, 2021, a decrease of $8.0 million or 5%. The decrease was primarily driven by employee-related costs, as personnel-related costs decreased $3.9 million, reflecting lower headcount, and stock-based compensation expense which decreased $1.7 million, largely due to decreases in the fair value of awards granted. In addition, advertising costs decreased $4.1 million due to certain brand media campaigns in the prior period and professional related costs decreased $2.2 million. These decreases were partially offset by a $3.1 million increase in conferences and events and a $2.5 million increase in employee travel.
Research and development expense was $53.8 million for the nine months ended October 31, 2022, compared to $50.3 million for the nine months ended October 31, 2021, an increase of $3.4 million or 7%. The increase was primarily driven by a $4.4 million increase in personnel-related costs and a $1.0 million increase in costs associated with our data centers related to pre-production costs for testing and quality assurance. These increases were partially offset by a $2.6 million decrease in stock-based compensation expense, largely due to decreases in the fair value of awards granted.
General and administrative expense was $60.6 million for the nine months ended October 31, 2022, compared to $61.3 million for the nine months ended October 31, 2021, a decrease of $0.7 million or 1%. The decrease was primarily driven by a $2.6 million decrease in professional related costs. This was partially offset by increases in employee-related costs, including a $0.8 million increase in personnel-related costs, reflecting higher headcount, as well as a $0.5 million increase in stock-based compensation expense, primarily due to performance based restricted stock units granted in the current period. In addition, software expense increased $0.6 million.
Net Loss
Net loss was $12.3 million and $58.1 million for the three and nine months ended October 31, 2022, respectively and $24.9 million and $70.1 million for the three and nine months ended October 31, 2021, respectively.
Non-GAAP Net Income (Loss)
In addition to our financial results determined in accordance with GAAP, we believe that non-GAAP net income (loss) is useful in evaluating our operating performance and our business.
Non-GAAP net income (loss) is a financial measure that is not calculated in accordance with GAAP. We define non-GAAP net income (loss) as our GAAP net loss as adjusted to exclude the effects of stock-based compensation expense. We believe non-GAAP net income (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our results of operations. We also believe non-GAAP net income (loss) is useful in evaluating our operating performance compared to that of other companies in our industry, as it eliminates the effects of stock-based compensation, which may vary for reasons unrelated to overall operating performance.
We use non-GAAP net income (loss) in conjunction with traditional GAAP net loss as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, and to evaluate the effectiveness of our business strategies. Our definition may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish this or similar metrics. Thus, our non-GAAP net income (loss) should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP.
Non-GAAP net income (loss) may be limited in its usefulness because it does not present the full economic effect of our use of stock-based compensation expense. We compensate for these limitations by providing a reconciliation of non-GAAP net income (loss) to the most closely related GAAP financial measure. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP net income (loss) in conjunction with GAAP net loss.
The following table provides a reconciliation of GAAP net loss to non-GAAP net income (loss):
Three months ended October 31, Nine months ended October 31,
(in thousands) 2022 2021 2022 2021
Net loss $ (12,310) $ (24,926) $ (58,140) $ (70,149)
Plus: Stock-based compensation expense 14,822  19,455  48,990  54,455 
Non-GAAP net income (loss) $ 2,512  $ (5,471) $ (9,150) $ (15,694)
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Constant Currency
We provide revenue, including year-over-year growth rates, adjusted to remove the impact of foreign currency rate fluctuations, which we refer to as constant currency. We believe providing revenue on a constant currency basis helps our investors to better understand our underlying performance, given the current macroeconomic environment. We calculate constant currency by using the current period results for entities reporting in currencies other than USD, which are then converted into USD at the average monthly exchange rates in effect during the comparative period, as opposed to the average monthly exchange rates in effect during the current period. Our definition may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our revenue on a constant currency basis should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP. We provide a reconciliation of revenue on a constant currency basis to the most closely related GAAP financial measure. We encourage investors and others to review our financial information in its entirety and to view revenue on a constant currency basis in conjunction with revenue on a GAAP basis.
The following table provides a reconciliation of revenue on a GAAP basis to revenue on a constant currency basis:
Three months ended October 31,
(in thousands) 2022 2021 Growth Rates
Revenue (GAAP) $ 99,280  $ 99,529  —  %
Effects of foreign currency rate fluctuations 3,738 
Revenue on a constant currency basis (Non-GAAP) $ 103,018  %
Nine months ended October 31,
(in thousands) 2022 2021 Growth Rates
Revenue (GAAP) $ 298,951  $ 289,645  %
Effects of foreign currency rate fluctuations 7,906 
Revenue on a constant currency basis (Non-GAAP) $ 306,857  %
Liquidity and Capital Resources
As of October 31, 2022, our principal sources of liquidity were cash and cash equivalents of $162.3 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 and lease payments, significant marketing events and related expenses, and 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. 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 11, 2020, we entered into a credit agreement with Silicon Valley Bank (the “Credit Agreement”). No significant debt issuance costs were incurred in association with the Credit Agreement. In January 2021, we amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors.
The 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 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 credit facility contains restrictive covenants that may limit our operating flexibility" for discussion of LIBOR being phased out.
The obligations under the 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.
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The 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 October 31, 2022, we were in compliance with all debt covenants. As of such date, the $50.0 million revolving loan facility had $35.9 million available and $14.1 million in letters of credit allocated as security in connection with office space.
Share Repurchase Program
In March 2022, our Board of Directors authorized a $100.0 million share repurchase program of our common stock. As of October 31, 2022, a total of 12,405,795 shares have been purchased at an average price of $5.57 per share for a total cost of $69.1 million since the commencement of the share repurchase program. As of October 31, 2022, there was approximately $30.9 million that remained available to be purchased under this share repurchase program.
Cash Flows
The following table summarizes our cash flows:
Nine months ended October 31,
(in thousands) 2022 2021
 Net cash used in operating activities
$ (18,092) $ (7,275)
 Net cash used in investing activities
$ (5,400) $ (12,333)
 Net cash (used in) provided by financing activities
$ (68,317) $ 19,665 
Operating Activities
Net cash used in operating activities of $18.1 million for the nine months ended October 31, 2022 was primarily due to the net loss of $58.1 million, as well as changes in unearned revenue of $64.8 million and changes in operating lease liabilities of $8.2 million. 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 $8.2 million and changes in accounts payable, accrued expenses and other current liabilities of $3.9 million. In addition, there were positive non-cash adjustments related to stock-based compensation expense of $49.0 million, depreciation and amortization expense of $13.1 million, and amortization of operating lease right-of-use assets of $6.7 million.
Net cash used in operating activities of $7.3 million for the nine months ended October 31, 2021 was primarily due to the net loss of $70.1 million, as well as changes in unearned revenue of $39.4 million and costs to obtain revenue contracts of $8.7 million, partially offset by changes in accounts receivable of $34.3 million, mainly due to timing of billing and cash collections during the period. Net cash used in operating activities was also partially offset by non-cash charges related to stock-based compensation expense of $54.5 million, depreciation and amortization expense of $12.5 million, and amortization of operating lease right-of-use assets of $6.9 million.
Investing Activities
Net cash used in investing activities of $5.4 million for the nine months ended October 31, 2022 reflected capital expenditures.
Net cash used in investing activities of $12.3 million for the nine months ended October 31, 2021 reflected capital expenditures associated with our new office spaces, primarily our new corporate headquarters in New York, NY.
Financing Activities
Net cash used in financing activities of $68.3 million for the nine months ended October 31, 2022 was primarily related to $68.7 million in cash outflows associated with repurchases of common stock as part of our share repurchase program, as well as payments for taxes related to the net share settlement of stock-based compensation awards of $1.8 million. This was partially offset by net proceeds from employee stock purchase plan withholdings of $1.9 million and proceeds from exercise of stock options of $0.6 million.
Net cash provided by financing activities of $19.7 million for the nine months ended October 31, 2021 was primarily related to proceeds from exercise of stock options of $15.9 million and net proceeds from employee stock purchase plan withholdings of $4.1 million, partially offset by payments of deferred financing costs of $0.3 million.
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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, although some have a term of several years, as well as contracts with 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 2023 and 2035.
        As of October 31, 2022, future minimum payments under these contractual obligations are as follows (in thousands):
Fiscal year ending January 31: Operating Leases Other
2023 (remainder of fiscal year) $ 4,730  $ 16,012 
2024 18,521  17,418 
2025 18,039  9,752 
2026 18,979  1,833 
2027 19,073  1,537 
2028 and thereafter 74,700  387 
Total $ 154,042  $ 46,939 
See Note 14, "Commitments and Contingencies", to our condensed consolidated financial statements for further discussion on contractual obligations.
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.
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, 2022 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, as well as recent foreign currency impacts due to the macroeconomic environment.
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 which includes labor costs. Nonetheless, if our costs, in particular personnel-related costs, continue to become subject to significant 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, 2022, we had cash and cash equivalents of $162.3 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.
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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 effective as of October 31, 2022.
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 nine months ended October 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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. 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
Menzione v. Yext, Inc., et al., No. 1:22-cv-05127 (S.D.N.Y.)
On June 17, 2022, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York by a purported purchaser of Company securities. The complaint names the Company, its former Chief Executive Officer (Howard Lerman), and its former Chief Financial Officer (Steven Cakebread) as defendants. The complaint alleges that the defendants purportedly made false and/or misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects, including information regarding the effects of the COVID-19 pandemic on the Company. The purported class includes all persons and entities that purchased or acquired our securities between March 4, 2021 and March 8, 2022. The complaint seeks monetary damages for alleged securities law violations. Motions for appointment as lead plaintiff and lead counsel were filed on August 16, 2022. On September 6, 2022, the court appointed the Operating Engineers Construction Industry and Miscellaneous Pension Fund to be lead plaintiff (“Lead Plaintiff”) for the purported class, and Robbins Gellar Rudman & Dowd LLP to be lead counsel for the purported class. On September 27, 2022, the court ordered a schedule for the filing of an amended complaint, and an answer or motion to dismiss briefing. On November 28, 2022, Lead Plaintiff filed a voluntary dismissal of the complaint, without prejudice.
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.
Risks Related to Our Business and Industry
Our revenue growth rate has slowed in recent periods.
We have a history of losses and may not achieve profitability in the future.
Adverse economic conditions including inflation or reduced technology spending may adversely impact our business.
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.
We have a limited operating history and our business has evolved, which makes it difficult to predict our future operating results.
We have experienced significant changes to our organization and structure and may not be able to effectively manage such changes.
Failure to adequately manage 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.
Changes in our pricing models 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.
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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.
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 Information Technology, Intellectual Property, and Data Security
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.
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.
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.
Risks Related to Laws, Regulation and Taxation
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.
Risks Related to Ownership of Our Common Stock and Our Status as a Public Company
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
The market price of our common stock has been and may continue to be volatile and may decline. Market volatility may affect the value of an investment in our common stock and could subject us to litigation.
Risks Related to Our Business and Industry
Our revenue growth rate has slowed in recent periods.
We experienced revenue growth rates of 31% from the fiscal year ended January 31, 2019 to the fiscal year ended January 31, 2020, 19% from the fiscal year ended January 31, 2020 to the fiscal year ended January 31, 2021, 10% from the fiscal year ended January 31, 2021 to the fiscal year ended January 31, 2022, and 3% from the nine months ended October 31, 2021 to the nine months ended October 31, 2022. We expect our growth in the coming year to be slower. 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 history of losses and may not achieve profitability in the future.
We generated a net loss of $12.3 million for the quarter ended October 31, 2022 and $93.3 million, $94.7 million, and $121.5 million for the fiscal years ended January 31, 2022, 2021 and 2020, respectively. As of October 31, 2022, we had an accumulated deficit of $668.7 million, reflecting our losses recognized historically on a GAAP basis. We will need to generate and sustain increased revenue levels and reduced expenses 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.
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Further, while we are reducing operating expenses in the near term, we expect our operating expenses may increase in the coming years as we hire additional personnel, expand our distribution channels, develop our technology and new features, face increased compliance costs associated with our growth and entry into new markets and geographies and adopt new systems to scale and automate our operations. 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.
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, including inflation, 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, changes in consumer behavior 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 demand or 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 have 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 has adversely affected our operating results. Further, Russia’s invasion of Ukraine may lead to disruption, instability, deterioration and volatility in global markets and industries that could negatively impact our business, financial condition and results of operations.
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 Russia's invasion of Ukraine, 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 the United Kingdom’s exit from the European Union in January 2020 are not fully known at this time. While the United Kingdom and the European Union have signed an EU-UK Trade and Cooperation Agreement, there are still many uncertainties and regulations applicable during the transition period will likely be amended and may diverge from European Union regulations. 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.
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 significantly disrupted business operations for us and our customers as well as suppliers, and other parties with whom we do business. Such disruptions may continue for an indefinite period of time. We have adopted several measures in response to the COVID-19 pandemic and continue to monitor regional developments to inform our operational decisions. Our offices have been open on a voluntary basis in accordance with guidance provided by government agencies, although currently the majority of our employees are still working remotely. While we continue to hold virtual events, we have also resumed in-person marketing events. We continue to monitor regional developments relating to the COVID-19 pandemic to inform operational decisions, but these efforts may not be successful and may require additional costs. The uncertain duration of these measures have had and may continue to have 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 and on our customers’ perception of the need for our products. In response to the COVID-19 pandemic some existing and potential customers, in particular customers in industries that have been highly impacted by the pandemic, and geographies with restrictions on business, 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 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 including its variants 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,
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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.
Further, even though some governments have begun to relax COVID-19 related restrictions, any recovery from the COVID-19 pandemic and related economic impact may be slowed or reversed by a variety of factors, such as, the spread of new variants of the COVID-19 virus. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of its global economic impact. Further, many of the factors discussed in this “Risk Factors” section are, and we anticipate will continue to be further, heightened or exacerbated by the impact of the COVID-19 pandemic.
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 business has evolved, which makes it difficult to predict our future operating results.
As a result of 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 significant changes to our organization and structure and may not be able to effectively manage those changes.
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 1,400 as of January 31, 2022 and have hired several members of our senior management team in recent years. We may reduce our headcount in the near term as we adjust our strategies to reflect the recent changes in our business. In addition, we have experienced significant leadership changes in recent quarters. In March 2022, our Chief Executive Officer, Howard Lerman, and our Chief Financial Officer, Steven Cakebread resigned, and our Chairman, Michael Walrath, and our Chief Accounting Officer, Darryl Bond, succeeded them as Chief Executive Officer and Chief Financial Officer, respectively. Additionally, in June 2022, our President and Chief Revenue Officer, David Rudnitsky resigned, and in October 2022, our Chief Revenue Officer, Brian Distelburger, announced that he would step down from his position as Chief Revenue Officer and remain an employee of the Company in a role that has not yet been determined. The Company has appointed Tom Nielsen as Chief Revenue Officer. While we believe these will be of long term value to our stockholders, the resulting changes and related disruption has and will continue to have near-term effects on our business, growth and profitability.
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 change our business, we may find it difficult to maintain our corporate culture. Any failure to manage 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 the majority of our employees are working remotely.
In addition, we will need to continue to improve our information technology infrastructure and our operational, financial and management systems and procedures. We have implemented many of these systems and procedures only recently, and they may not work as we expect or at all. If we continue to grow, 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, 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. Changes to our systems and infrastructure may require us to commit additional financial