UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 ~~April~~July 3031, 2021

☐ 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: 001-38982

MEDALLIA, INC.

(Exact name of registrant as specified in its charter)


Delaware			77-0558353
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
575 Market Street, Suite 1850 San Francisco, California 94105 (Address of principal executive offices, including zip code)

(650) 321-3000

(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, $0.001 par value per share

MDLA

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, 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 Exchange Act). Yes ☐ No ☒

As of ~~May~~August 2620, 2021, ~~158~~160,~~590~~956,~~329~~790 shares of the registrant's common stock, $0.001 par value, were outstanding.

MEDALLIA, INC.

TABLE OF CONTENTS

		Page
	Special Note Regarding Forward-Looking Statements	1
	PART I - FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Shareholders Equity	7
	Notes to Unaudited Condensed Consolidated Financial Statements	89
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	2729
Item 3	Qualitative and Quantitative Disclosures About Market Risk	3841
Item 4	Controls and Procedures	3942
	PART II - OTHER INFORMATION
Item 1	Legal Proceedings	4144
Item 1A.	Risk Factors	4144
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	7882
Item 3	Defaults Upon Senior Securities	7883
Item 4	Mine Safety Disclosures	7883
Item 5	Other Information	7883
Item 6	Exhibits	7984
	Signatures	8085

© 2021 Medallia, Inc. All rights reserved. Medallia®, the Medallia logo, and the names and marks associated with Medallia’s products are trademarks of Medallia. All other trademarks are the property of their respective owners.

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and exhibits thereto, contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risk and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our proposed acquisition by entities affiliated with Thoma Bravo, L.P. (Thoma Bravo);

•our expectations regarding the timing and completion of the proposed acquisition by entities affiliated with Thoma Bravo;

•our ability to attract new customers;

•our ability to retain customers;

•our ability to maintain and improve our products;

•our ability to up-sell and cross-sell within our existing customer base;

•our future financial performance, including trends in revenue, cost of revenue, gross profit or gross margin, operating expenses, customers and other key metrics;

•our expectations and management of future growth;

•our ability to achieve or maintain profitability;

•the implications and the effects of the COVID-19 pandemic on our business;

•possible harm caused by significant disruption of service or loss or unauthorized access to users’ data;

•our ability to prevent serious errors or defects in our products;

•our ability to protect our brand;

•our ability to attract and retain key personnel and highly qualified personnel;

•our ability to manage our international expansion;

•our ability to maintain, protect and enhance our intellectual property;

•our ability to effectively integrate our products and solutions with others;

•our ability to successfully identify, acquire and integrate companies and assets;

•our ability to offer high-quality customer support;

•the increased expenses associated with being a public company;

•the demand for our platform or for customer experience market solutions in general;

•our ability to compete successfully in competitive markets; and

•our ability to respond to rapid technological changes.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors related to the COVID-19 pandemic and those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this

~~Table~~risks, ofuncertainties ~~Contents~~and other factors related to the COVID-19 pandemic, our proposed acquisition by entities affiliated with Thoma Bravo, and those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Table of Contents

Item 1. FINANCIAL STATEMENTS

Medallia, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and par value data)

(unaudited)

April 30, 2021

January 31, 2021

July 31, 2021

January 31, 2021

Assets

Current assets:

Cash and cash equivalents

~~283~~257,~~939~~051

428,328

Marketable securities

~~256~~250,~~598~~528

254,061

Trade and other receivables, net

~~103~~126,~~312~~764

181,431

Deferred commissions, current

3235,~~366~~509

31,107

Prepaid expenses and other current assets

3032,~~607~~732

23,835

Total current assets

~~706~~702,~~822~~584

918,762

Property and equipment, net

4240,~~416~~903

40,668

Operating lease right-of-use assets

3634,~~808~~721

39,050

Deferred commissions, noncurrent

6975,~~571~~934

68,929

Goodwill

~~412~~410,~~480~~453

262,942

Intangible assets, net

8377,~~547~~575

60,623

Other noncurrent assets

1116,~~509~~683

10,675

Total assets

1,~~363~~358,~~153~~853

1,401,649

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

1617,~~349~~756

11,904

Accrued expenses and other current liabilities

4350,~~619~~730

39,756

Accrued compensation

3349,~~171~~861

42,292

Deferred revenue, current

~~263~~262,~~846~~794

293,231

Total current liabilities

~~356~~381,~~985~~141

387,183

Convertible senior notes, net

~~560~~561,~~276~~105

448,064

Deferred revenue, noncurrent

21,~~337~~514

1,396

Lease liability, noncurrent

4543,~~285~~181

47,631

Other liabilities

1415,~~509~~182

9,134

Total liabilities

~~979~~1,~~392~~002,123

893,408

Commitments and contingencies (Note 11)

Stockholders' equity:

Common stock, $0.001 par value: 1,000,000,000 shares authorized as of April 30, 2021 and January 31, 2021; 158,035,275 shares and 154,995,819 shares issued and outstanding as of April 30, 2021 and January 31, 2021, respectively

151

150

Common stock, $0.001 par value: 1,000,000,000 shares authorized as of July 31, 2021 and January 31, 2021; 160,601,679 shares and 154,995,819 shares issued and outstanding as of July 31, 2021 and January 31, 2021, respectively

153

150

Additional paid-in capital

1,~~057~~094,~~084~~280

1,136,534

Accumulated other comprehensive loss

1,299

1,186

Accumulated other comprehensive income (loss)

(440)

1,186

Accumulated deficit

(~~674~~737,~~773~~263)

(629,629)

Total stockholders' equity

~~383~~356,~~761~~730

508,241

Total liabilities and stockholders' equity

1,~~363~~358,~~153~~853

1,401,649

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Medallia, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Revenue:
Subscription	$	117,392	$	~~106,071~~	$	92,831	$	~~88,992~~	$	223,463	$	181,823
Professional services	26,716		~~25,303~~		22,694		~~23,699~~		52,019		46,393
Total revenue	144,108		~~131,374~~		115,525		~~112,691~~		275,482		228,216
Cost of revenue:
Subscription	27,592		~~24,156~~		19,130		~~17,344~~		51,748		36,474
Professional services	26,931		~~23,542~~		22,042		~~22,219~~		50,473		44,261
Total cost of revenue	54,523		~~47,698~~		41,172		~~39,563~~		102,221		80,735
Gross profit	89,585		~~83,676~~		74,353		~~73,128~~		173,261		147,481
Operating expenses:
Research and development	35,363		~~30,637~~		27,790		~~32,379~~		66,000		60,169
Sales and marketing	80,150		~~72,980~~		51,942		~~52,015~~		153,130		103,957
General and administrative	33,909		~~30,113~~		29,137		~~21,498~~		64,022		50,635
Total operating expenses	149,422		~~133,730~~		108,869		~~105,892~~		283,152		214,761
Loss from operations	(59,837)		~~(50,054)~~		(34,516)		~~(32,764)~~		(109,891)		(67,280)
Other income (expense), net	(1,716)		~~(1,593)~~		(448)		~~175~~		(3,309)		(273)
Loss before provision for income taxes	(61,553)		~~(51,647)~~		(34,964)		~~(32,589)~~		(113,200)		(67,553)
Provision for (benefits from) income taxes			774				(60)
Provision for income taxes	937				234				1,711		174
Net loss	$	(62,490)	$	~~(52,421)~~	$	(35,198)	$	~~(32,529)~~	$	(114,911)	$	(67,727)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.39)	$	~~(0.34)~~	$	(0.25)	$	~~(0.24)~~	$	(0.73)	$	(0.49)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	159,068		~~156,364~~		142,479		~~135,993~~		157,738		139,272

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Medallia, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Net loss	$	(62,490)	$	~~(52,421)~~	$	(35,198)	$	~~(32,529)~~	$	(114,911)	$	(67,727)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment	(2,215)		~~602~~		1,948		~~(2,531)~~		(1,613)		(583)
Change in unrealized gain on marketable securities			—				3
Change in unrealized loss on marketable securities	(6)				(15)				(6)		(12)
Change in unrealized gain on cash flow hedges			(489)				(223)
Change in unrealized gain (loss) on cash flow hedges	482				(547)				(7)		(770)
Other comprehensive income (loss)	(1,739)		~~113~~		1,386		~~(2,751)~~		(1,626)		(1,365)
Comprehensive loss	$	(64,229)	$	~~(52,308)~~	$	(33,812)	$	~~(35,280)~~	$	(116,537)	$	(69,092)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Medallia, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended April 30,
	Six Months Ended July 31,
	2021		2020
Operating activities
Net loss	$	(52114,~~421~~911)	$	(3267,~~529~~727)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1021,~~111~~430		511,~~468~~790
Amortization of deferred commissions	716,~~931~~724		612,~~081~~433
Non-cash lease expense	25,~~778~~450		26,~~832~~219
Stock-based compensation expense	2353,~~601~~298		3156,~~804~~438
Amortization of debt issuance costs	827		—
Lease exit costs	—		8,392
Other	5,915		845
Amortization of debt issuance costs	1,656		—
Changes in assets and liabilities:
Other	6,196		2,099
Trade and other receivables	81,679		81,689
Changes in assets and liabilities:
Deferred commissions	(9,832)		(4,345)
Trade and other receivables	58,775		63,310
Prepaid expenses and other current assets	(6,428)		(3,399)
Deferred commissions	(28,130)		(19,983)
Other noncurrent assets	(125)		(892)
Prepaid expenses and other current assets	(8,247)		196
Accounts payable	1,905		(2,726)
Other noncurrent assets	(1,172)		(1,404)
Deferred revenue	(35,700)		(39,248)
Accounts payable	4,193		(2,912)
Accrued expenses and other current liabilities	(13,659)		(19,778)
Deferred revenue	(39,002)		(57,766)
Other noncurrent liabilities	(2,249)		(2,689)
Accrued expenses and other current liabilities	9,577		(7,001)
Net cash provided by operating activities	14,333		23,113
Other noncurrent liabilities	(2,628)		(393)
Investing activities
Net cash (used in) provided by operating activities	(16,791)		3,691
Purchases of property, equipment and other	(6,484)		(5,374)
Investing activities
Purchase of marketable securities	(55,877)		(22,748)
Purchases of property, equipment and other	(12,844)		(9,774)
Maturities of marketable securities	49,500		76,423
Purchase of marketable securities	(153,773)		(139,196)
Proceeds from sale of marketable securities	3,500		600
Maturities of marketable securities	152,900		133,473
Acquisitions, net of cash acquired	(163,762)		(25,209)
Proceeds from sale of marketable securities	3,500		1,100
Net cash (used in) provided by investing activities	(173,123)		23,692
Acquisitions, net of cash acquired	(163,762)		(80,372)
Financing activities
Net cash used in investing activities	(173,979)		(94,769)
Proceeds from revolving line of credit	—		43,000
Financing activities
Proceeds from exercise of stock options	7,584		19,180
Proceeds from revolving line of credit	—		43,000
Proceeds from share purchase plan	7,953		10,267
Proceeds from exercise of stock options	14,802		41,032
Principal payments on financing leases	(1,514)		(1,041)
Proceeds from share purchase plan	7,953		10,267
Net cash provided by financing activities	14,023		71,406
Principal payments on financing leases	(3,184)		(2,117)
Effect of exchange rate changes on cash and cash equivalents	378		(380)
Repayment of debt assumed in acquisitions and other	(200)		(2,139)
Net (decrease) increase in cash and cash equivalents	(144,389)		117,831
Net cash provided by financing activities	19,371		90,043
Cash and cash equivalents at beginning of period	428,328		226,866
Effect of exchange rate changes on cash and cash equivalents	122		(49)
Cash and cash equivalents at end of period	$	283,939	$	344,697
Net decrease in cash and cash equivalents	(171,277)		(1,084)
Supplemental disclosures of cash flow information
Cash and cash equivalents at beginning of period	428,328		226,866
Cash paid for interest	$	539	$	168
Cash and cash equivalents at end of period	$	257,051	$	225,782
Cash paid for income taxes	$	495	$	469
Supplemental disclosures of cash flow information
Noncash investing and financing activities
Cash paid for interest	$	723	$	652
Other receivables related to stock option exercises	$	103	$	93
Cash paid for income taxes	$	1,759	$	656
Accrued unpaid capital expenditures	$	1,703	$	1,318
Noncash investing and financing activities
Other receivables related to stock option exercises	$	386	$	1
Accrued unpaid capital expenditures	$	3,877	$	2,111

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Medallia, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)

	Three Months Ended July 31, 2021
	Common Stock			AdditionalPaid-InCapital		AccumulatedOtherComprehensive Income (Loss)		AccumulatedDeficit		TotalStockholders'Equity
	Shares	Amount
Balance at January 31, 2021	154,995,819	$	150	$	1,136,534	$	1,186	$	(629,629)	$	508,241
Cumulative-effect adjustment related to the adoption of ASU 2020-06	—	—		(118,662)		—		7,277		(111,385)
Exercise of employee stock options	1,538,769	1		7,658		—		—		7,659
Release of restricted stock units	1,159,636	—		—		—		—		—
Issuance of shares from share purchase plan	341,051	—		7,953		—		—		7,953
Stock-based compensation	—	—		23,601		—		—		23,601
Other comprehensive income	—	—		—		113		—		113
Net loss	—	—		—		—		(52,421)		(52,421)
Balance at April 30, 2021	158,035,275	$	151	$	1,057,084	$	1,299	$	(674,773)	$	383,761
Exercise of employee stock options	1,350,546	2		7,499		—		—		7,501
Release of restricted stock units	1,215,858	—		—		—		—		—
Stock-based compensation	—	—		29,697		—		—		29,697
Other comprehensive loss	—	—		—		(1,739)		—		(1,739)
Net loss	—	—		—		—		(62,490)		(62,490)
Balance at July 31, 2021	160,601,679	$	153	$	1,094,280	$	(440)	$	(737,263)	$	356,730

	Common Stock			AdditionalPaid-InCapital		AccumulatedOtherComprehensiveLoss		AccumulatedDeficit		TotalStockholders'Equity
	Three Months Ended July 31, 2020
	Common Stock			AdditionalPaid-InCapital		AccumulatedOtherComprehensive Income (Loss)		AccumulatedDeficit		TotalStockholders'Equity
	Shares	Amount
Balance at January 31, 2020	132,346,402	$	132	$	878,843	$	(206)	$	(480,973)	$	397,796
Exercise of employee stock options	5,184,632	6		18,928		—		—		18,934
Release of restricted stock units	1,671,652	—		—		—		—		—
Issuance of shares from share purchase plan	591,732	1		10,266		—		—		10,267
Stock-based compensation	—	—		31,804		—		—		31,804
Other comprehensive loss	—	—		—		(2,751)		—		(2,751)
Net loss	—	—		—		—		(32,529)		(32,529)
Balance at April 30, 2020	139,794,418	$	139	$	939,841	$	(2,957)	$	(513,502)	$	423,521
Exercise of employee stock options	4,668,851	3		21,757		—		—		21,760
Release of restricted stock units	1,091,082	—		—		—		—		—
Stock-based compensation	—	—		24,634		—		—		24,634
Other comprehensive income	—	—		—		1,386		—		1,386
Net loss	—	—		—		—		(35,198)		(35,198)
Balance at July 31, 2020	145,554,351	$	142	$	986,232	$	(1,571)	$	(548,700)	$	436,103

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Medallia, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)


	Six Months Ended July 31, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at January 31, 2021	154,995,819	$	150	$	1,136,534	$	1,186	$	(629,629)	$	508,241
Cumulative-effect adjustment related to the adoption of ASU 2020-06	—	—		(118,662)		—		7,277		(111,385)
Exercise of employee stock options	2,889,315	3		15,157		—		—		15,160
Release of restricted stock units	2,375,494	—		—		—		—		—
Issuance of shares from share purchase plan	341,051	—		7,953		—		—		7,953
Stock-based compensation	—	—		53,298		—		—		53,298
Other comprehensive loss	—	—		—		(1,626)		—		(1,626)
Net loss	—	—		—		—		(114,911)		(114,911)
Balance at July 31, 2021	160,601,679	$	153	$	1,094,280	$	(440)	$	(737,263)	$	356,730


	Six Months Ended July 31, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at January 31, 2020	132,346,402	$	132	$	878,843	$	(206)	$	(480,973)	$	397,796
Exercise of employee stock options	9,853,483	9		40,685		—		—		40,694
Release of restricted stock units	2,762,734	—		—		—		—		—
Issuance of shares from share purchase plan	591,732	1		10,266		—		—		10,267
Stock-based compensation	—	—		56,438		—		—		56,438


Other comprehensive loss	—	—		—		(1,365)		—		(1,365)
Net loss	—	—		—		—		(67,727)		(67,727)
Balance at July 31, 2020	145,554,351	$	142	$	986,232	$	(1,571)	$	(548,700)	$	436,103

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Medallia, Inc. (the Company or Medallia) provides an enterprise Software-as-a-Service (SaaS) platform that utilizes deep learning-based artificial intelligence (AI) technology to analyze structured and unstructured data from signal fields across human, digital and Internet of Things (IoT) interactions at great scale to derive personalized and predictive insights. Medallia's customers include companies in various industries such as retail, technology, manufacturing, financial services, insurance and hospitality. Medallia is headquartered in San Francisco, California.

Merger Agreement

On July 25, 2021, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Project Metal Parent, LLC (Parent) and Project Metal Merger Sub, Inc. (Merger Sub), providing for the Company’s acquisition in an all cash transaction valued at $6.4 billion (the Merger). Parent and Merger Sub are affiliates of Thoma Bravo.

Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of the Company’s common stock (except for certain shares specified in the Merger Agreement) will be canceled and automatically converted into the right to receive cash in an amount equal to $34.00 per share, without interest.

Completion of the Merger is subject to the satisfaction of certain terms and conditions set forth in the Merger Agreement, including (i) approval of the Merger Agreement by our stockholders; (ii) the absence of any law or order restraining, enjoining or otherwise prohibiting the Merger; and (3) the expiration or termination of the waiting period under the United States Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and clearance under the antitrust laws of certain non-United States jurisdictions. The Merger is expected to close in calendar year 2021. Upon consummation of the Merger, the Company’s common stock will no longer be listed on any public market.

Basis of Presentation and Consolidation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of January 31, 2021 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. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of operations, comprehensive loss, stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements in its Annual Report on Form 10-K for the year ended January 31, 2021.

The Company's fiscal year ends on January 31. References to fiscal year 2022, for example, refer to the fiscal year ending January 31, 2022.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements and reported amounts of revenue and expenses during the periods covered by the consolidated financial statements and accompanying notes. Such estimates include, but are not limited to revenue recognition, stock-based compensation expense, allowance for credit losses, the assessment of the recoverability of identified intangible assets, impairment of right-of-use assets and contingencies. The Company bases its estimates on historical experience and on assumptions that it believes are reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.

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Notes to Unaudited Condensed Consolidated Financial Statements

credit losses, the assessment of the recoverability of identified intangible assets, impairment of right-of-use assets and contingencies. The Company bases its estimates on historical experience and on assumptions that it believes are reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.

Segment Information

Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker, which the Company has identified as being the chief executive officer, in deciding how to allocate resources and assessing performance. The Company operates in one operating segment. The Company's chief operating decision maker allocates resources and assesses performance at the consolidated level.

Trade and Other Receivables and Allowance for Credit Losses

Trade and other receivables are primarily comprised of trade receivables that are recorded at the invoice amount, net of an allowance for credit losses. The Company assess the allowance for credit losses on trade receivables by taking into consideration forecasts of future economic conditions, information about past events, such as its historical trend of write-offs, and customer-specific circumstances, such as bankruptcies and disputes. The allowance for credit losses on trade receivables is recorded in general and administrative expenses on the Company's unaudited condensed consolidated statements of operations. Other receivables represent unbilled receivables related to subscription and professional services contracts.

8As of July 31, 2021 and January 31, 2021, the allowance for credit losses was $4.1 million and $4.0 million, respectively.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and trade and other receivables. For cash, cash equivalents and marketable securities, the Company is exposed to credit risk in the event of default to the extent of the amounts recorded on the unaudited condensed consolidated balance sheets. A majority of the cash balances are with U.S. banks and are insured to the extent defined by the Federal Deposit Insurance Corporation.

The Company does not require collateral for trade receivables. No customer accounted for 10% or more of total revenues for the three and six months ended July 31, 2021 and 2020. One customer accounted for 10% or more of trade and other receivables, net as of July 31, 2021 and no customer accounted for 10% or more of trade and other receivables, net as of July 31, 2020.

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Notes to Unaudited Condensed Consolidated Financial Statements

such as its historical trend of write-offs, and customer-specific circumstances, such as bankruptcies and disputes. The allowance for credit losses on trade receivables is recorded in general and administrative expenses on the Company's unaudited condensed consolidated statements of operations. Other receivables represent unbilled receivables related to subscription and professional services contracts.

As of April 30, 2021 and January 31, 2021, the allowance for credit losses was $4.2 million and $4.0 million, respectively.

Concentrations of Credit Risk and Significant Customers

The Company does not require collateral for trade receivables. No customer accounted for 10% or more of total revenues for the three months ended April 30, 2021 and 2020. No customer accounted for 10% or more of trade and other receivables, net as of April 30, 2021 and 2020.

Impact of Recently Adopted Accounting Pronouncements

In August 2020 the Financial Accounting Standards Board (FASB) issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition. Early adoption is permitted. Effective February 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach. Adoption of the new standard resulted in an increase to accumulated deficit of $7.3 million, a decrease to additional paid-in capital of $118.7 million, and an increase to convertible senior notes, net of issuance costs of $111.4 million. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. The Company ~~will~~uses ~~use~~ the if-converted method to calculate diluted EPS. If the Company makes an irrevocable election to settle the principal of the convertible senior notes in cash and the excess conversion spread in shares, the if-converted method will result in a reduced number of shares issued to reflect only the excess conversion. Since the Company had a net loss for the three and six months ended ~~April~~July 3031, 2021, the convertible senior notes were determined to be anti-dilutive and therefore had no impact to basic or diluted net loss per share for the period as a result of adopting ASU 2020-06.

2. Revenue

Revenue Recognition

Revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

The Company determines revenue recognition through the following steps:

•identification of the contract, or contracts, with a customer;

•identification of the performance obligations in the contract;

•determination of the transaction price;

•allocation of the transaction price to the performance obligations in the contract; and

•recognition of revenue when, or as, the Company satisfies a performance obligation.

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Notes to Unaudited Condensed Consolidated Financial Statements

Subscription Revenue

Subscription revenue is derived from customers accessing the Company's proprietary hosted cloud application. The Company's customers do not have the ability to take possession of the software operating the cloud application. The contracted subscription terms are typically one year to three years.

The Company recognizes subscription revenue ratably over the subscription term, commencing on the date the service is provisioned.

Professional Services Revenue

Professional services revenue consists of managed services and implementation and other services. These services are distinct from subscription revenue.

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Notes to Unaudited Condensed Consolidated Financial Statements

Managed services support the Company's customers by providing a range of ongoing services including program design, launch, enhancement, expansion and analytics. Managed services are a stand-ready obligation to perform these services over the term of the arrangement and as a result, revenues are recognized ratably over the term of the arrangement.

Implementation services consist primarily of initial design, integration and configuration services. Other professional services include projects that enable customers to gain insightful business information through data analysis, and the Company's institute training programs.

Implementation and other services revenue are recognized as services are performed.

Contracts with Multiple Performance Obligations

Most of the Company's contracts with customers contain multiple performance obligations. The Company's subscription services are sold for a broad range of amounts (the selling price is highly variable) and a representative standalone selling price (SSP) is not discernible from past transactions or other observable evidence. Standalone selling prices for professional services are estimated based upon observable transactions when those services are sold on a standalone basis. As a result, the SSP for subscription services included in a contract with multiple performance obligations is determined by applying a residual approach whereby performance obligations related to professional services within a contract are first allocated a portion of the transaction price based upon their respective SSPs, with the residual amount of transaction price allocated to subscription services.

Contract Balances and Remaining Performance Obligations

Contract assets represent revenue recognized for contracts that have not yet been invoiced to customers, typically for multi-year arrangements. Total contract assets were $5.58 million and $3.5 million as of ~~April~~July 3031, 2021 and January 31, 2021, respectively. These balances are included within trade and other receivables, net, on the unaudited condensed consolidated balance sheets.

Contract liabilities consist of deferred revenue. Revenue is deferred when the Company has the right to invoice in advance of services being provided, primarily related to its subscription services. The Company recognized revenue of $99107.92 million and $93180.43 million ~~for~~during the three and six months ended ~~April~~ July 3031, 2021, respectively and $91.6 million and $170.7 million during the three and six months ended July 31, 2020, respectively, that were included in the deferred revenue balances at the beginning of the respective periods.

The Company applied a practicable expedient allowing it not to disclose the amount of the transaction price allocated to the remaining performance obligations for contracts with an original expected duration of one year or less, which includes certain professional service contracts.

Remaining performance obligations represent contracted revenue that has not yet been recognized, and include deferred revenue, and amounts that will be invoiced and recognized as revenue in future periods. As of ~~April~~July 3031, 2021, the Company's remaining performance obligations were $~~797~~819.65 million, approximately 5052% of which it expects to recognize as revenue over the next 12 months and the remaining balance will be recognized thereafter. As of January 31, 2021, the Company's remaining performance obligations were $800.1 million, approximately 49% of which it expects to recognize as revenue over the next 12 months and the remaining balance will be recognized thereafter.

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Notes to Unaudited Condensed Consolidated Financial Statements

As of January 31, 2021, the Company's remaining performance obligations were $800.1 million, approximately 49% of which it expects to recognize as revenue over the next 12 months and the remaining balance will be recognized thereafter.

Disaggregation of Revenue by Geographic Region

The following table sets forth revenue by geographic region based on the billing address of the customers' parent for the periods presented (in thousands):

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
North America	$	108,988	$	~~100,555~~	$	88,506	$	~~86,925~~	$	209,544	$	175,432
EMEA	23,792		~~20,261~~		17,286		~~16,942~~		44,054		34,227
Other (1)	11,328		~~10,558~~		9,733		~~8,824~~		21,884		18,557
Total	$	144,108	$	~~131,374~~	$	115,525	$	~~112,691~~	$	275,482	$	228,216

(1) Other includes Asia Pacific and Latin America

The United States comprised 7372% of the Company's revenue during ~~both~~each of the three and six months ended ~~April~~July 3031, 2021, and 73% during each of the three and six months ended July 31, 2020. No other country comprised 10% or greater of the Company's revenue during each of the three and six months ended ~~April~~July 3031, 2021 and 2020.

3. Fair Value of Assets and Liabilities

The Company estimates the fair value of cash equivalents, marketable securities and foreign currency derivative contracts by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data or other means.

Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. The inputs require significant management judgment or estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

All of the Company's cash equivalents, marketable securities and foreign currency derivative contracts are classified within Level 1 or Level 2 because the Company's cash equivalents, marketable securities and foreign currency derivative contracts are valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs.

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Notes to Unaudited Condensed Consolidated Financial Statements

The following tables ~~represents~~represent the fair value of assets and liabilities measured at fair value on a recurring basis using the above hierarchy (in thousands):

	April 30, 2021								January 31, 2021
	July 31, 2021								January 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	~~149~~179,~~464~~836	$	—	$	—	$	~~149~~179,~~464~~836	$	265,945	$	—	$	—	$	265,945
Corporate notes and bonds	—		3,044		—		3,044		—		—		—		—
Commercial paper	—		5,000		—		5,000		—		18,997		—		18,997
Commercial paper	—		26,148		—		26,148		—		18,997		—		18,997
U.S. government and agency securities	—		—		—		—		—		24,999		—		24,999
Total cash equivalents	~~149~~179,~~464~~836		295,~~192~~000		—		~~178~~184,~~656~~836		265,945		43,996		—		309,941
Marketable securities:
Corporate notes and bonds	—		5861,~~196~~860		—		5861,~~196~~860		—		45,057		—		45,057
Commercial paper	—		6079,~~959~~945		—		6079,~~959~~945		—		42,472		—		42,472
U.S.. government and agency securities	—		137,443		—		137,443		—		166,532		—		166,532
U.S. government and agency securities	—		108,723		—		108,723		—		166,532		—		166,532
Total marketable securities	—		~~256~~250,~~598~~528		—		~~256~~250,~~598~~528		—		254,061		—		254,061
Derivative assets	—		12,~~322~~203		—		12,~~322~~203		—		1,027		—		1,027
Total assets measured at fair value	$	~~149~~179,~~464~~836	$	~~287~~257,~~112~~731	$	—	$	~~436~~437,~~576~~567	$	265,945	$	299,084	$	—	$	565,029
Liabilities:
Derivative liabilities	$	—	$	~~1,841~~502	$	—	$	~~1,841~~502	$	—	$	1,965	$	—	$	1,965
Total liabilities measured at fair value	$	—	$	~~1,841~~502	$	—	$	~~1,841~~502	$	—	$	1,965	$	—	$	1,965

Convertible Senior Notes

In September 2020 the Company issued $575.0 million aggregate principal amount 0.125% convertible senior notes due 2025 as described in Note 9, Debt. As of ~~April~~July 3031, 2021, the fair value of these Notes was approximately $~~587~~613.98 million. The fair value was determined based on the quoted price for the Notes in an over-the-counter market on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.

4. Cash Equivalents and Marketable Securities

As of ~~April~~July 3031, 2021, cash equivalents and marketable securities consisted of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
Money market funds	$	~~149~~179,~~464~~836	$	—	$	—	$	~~149~~179,~~464~~836
Corporate notes and bonds	61,~~249~~864		—		(94)		61,~~240~~860
Commercial paper	8784,~~107~~945		—		—		8784,~~107~~945
U.S. government and agency securities	~~137~~108,~~409~~699		3424		—		~~137~~108,~~443~~723
Total	$	435,~~229~~344	$	3424	$	(94)	$	435,~~254~~364
Included in cash and cash equivalents	$	~~178~~184,~~656~~836	$	—	$	—	$	~~178~~184,~~656~~836
Included in marketable securities	$	~~256~~250,~~573~~508	$	3424	$	(94)	$	~~256~~250,~~598~~528

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Notes to Unaudited Condensed Consolidated Financial Statements

As of January 31, 2021, cash equivalents and marketable securities consisted of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
Money market funds	$	265,945	$	—	$	—	$	265,945
Corporate notes and bonds	45,059		—		(2)		45,057
Commercial paper	61,469		—		—		61,469
U.S. government and agency securities	191,504		27		—		191,531
Total	$	563,977	$	27	$	(2)	$	564,002
Included in cash and cash equivalents	$	309,941	$	—	$	—	$	309,941
Included in marketable securities	$	254,036	$	2527	$	—(2)	$	254,061

As of ~~April~~July 3031, 2021 and January 31, 2021, ~~all~~ marketable securities generally had a stated maturity date of less than one year. The unrealized losses associated with the Company's debt securities were immaterial as of ~~April 30~~July 31, 2021, and January 31, 2021, and the Company did not recognize any credit losses related to its debt securities during the three and six months ended ~~April 30~~July 31, 2021 or 2020.

5. Derivative Instruments

Cash Flow Hedges

As of ~~April~~July 3031, 2021 and January 31, 2021, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with total notional values of $2421.89 million and $13.7 million, respectively. All contracts have maturities not greater than 13 months. The notional value represents the amount that will be bought or sold upon maturity of the forward contract.

During the three months ended ~~April~~July 3031, 2021 and 2020, all cash flow hedges were considered effective.

Foreign Currency Forward Contracts Not Designated as Hedges

As of ~~April~~July 3031, 2021 and January 31, 2021, the Company had outstanding forward contracts not designated as hedges with total notional values of $2830.90 million and $45.4 million, respectively. All contracts have maturities not greater than 13 months.

The fair values of outstanding derivative instruments were as follows (in thousands):

April 30, 2021

January 31, 2021

July 31, 2021

January 31, 2021

Derivative assets (recorded in prepaid expenses and other current assets):

Foreign currency forward contracts designated as cash flow hedges

~~458~~601

713

Foreign currency forward contracts not designated as hedges

~~864~~1,602

314

Derivative liabilities (recorded in accrued expenses and other current liabilities):

Foreign currency forward contracts designated as cash flow hedges

~~1,139~~409

919

Foreign currency forward contracts not designated as hedges

~~702~~93

1,046

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Notes to Unaudited Condensed Consolidated Financial Statements

Gains (losses) associated with foreign currency forward contracts designated as cash flow hedges were as follows (in thousands):

	Unaudited Condensed Consolidated Statements of Operations and Statements of Comprehensive Loss (OCI) Locations	Three Months Ended ~~April~~July 3031,				Six Months Ended July 31,
		2021		2020		2021		2020
Gains (losses) recognized in OCI (effective portion)	Change in unrealized gains (losses) on cash flow hedges, net of tax	$	99	$	72
Gains (losses) recognized in OCI	Change in unrealized gains (losses) on cash flow hedges, net of tax	$	810	$	(748)	$	909	$	(676)
Gains reclassified from OCI into income (effective portion)	Revenues	10		130
Gains reclassified from OCI into income	Revenues	(46)		161		(36)		291
Gains (losses) reclassified from OCI into income (effective portion)	General and administrative	579		164
Gains (losses) reclassified from OCI into income	General and administrative	375		(363)		953		(199)
Losses recognized in income (amount excluded from effectiveness testing and ineffective portion)	Other income (expense), net	6		(49)
Losses recognized in income	Other income (expense), net	4		(9)		10		(58)

Of the gains (losses) recognized in OCI for the foreign currency forward contracts designated as cash flow hedges as of ~~April~~ July 3031, 2021, $0.37 million is expected to be reclassified out of OCI within the next 12 months.

Gains (losses) associated with foreign currency forward contracts not designated as cash flow hedges were as follows (in thousands):

	Unaudited Condensed Consolidated Statements of Operations Location	Three Months Ended ~~April~~July 3031,				Six Months Ended July 31,
Derivative Type		2021		2020		2021		2020
Foreign currency forward contracts not designated as hedges	Other income (expense), net	$	~~(169)~~804	$	~~666~~(1,784)	$	635	$	(1,117)

As of ~~April~~July 3031, 2021, information related to offsetting arrangements was as follows (in thousands):

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets		Net Amounts of Assets in the Unaudited Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets				Net Assets Exposed
							Financial Instruments		Cash Collateral Received
Derivative assets:
Counterparty A	$	145	$	—	$	145	$	(111)	$	—	$	—34
Counterparty B	12,~~321~~158		—		12,~~321~~158		(~~1,321~~491)		—		—1,667
Total	$	12,~~322~~203	$	—	$	12,~~322~~203	$	(~~1,322~~502)	$	—	$	—1,701
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets		Net Amounts of Liabilities in the Unaudited Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets				Net Liabilities Exposed
							Financial Instruments		Cash Collateral Pledged
Derivative liabilities:
Counterparty A	$	—11	$	—	$	—11	$	—(11)	$	—	$	—
Counterparty B	~~1,841~~491		—		~~1,841~~491		(~~1,321~~491)		—		~~520~~—
Total	$	~~1,841~~502	$	—	$	~~1,841~~502	$	(~~1,321~~502)	$	—	$	~~520~~—

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Notes to Unaudited Condensed Consolidated Financial Statements

As of January 31, 2021, information related to offsetting arrangements was as follows (in thousands):


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets		Net Amounts of Assets in the Unaudited Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets				Net Assets Exposed
							Financial Instruments		Cash Collateral Received
Derivative assets:
Counterparty A	$	—	$	—	$	—	$	—	$	—	$	—
Counterparty B	1,027		—		1,027		(1,027)		—		—
Total	$	1,027	$	—	$	1,027	$	(1,027)	$	—	$	—


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets		Net Amounts of Liabilities in the Unaudited Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets				Net Liabilities Exposed
							Financial Instruments		Cash Collateral Pledged
Derivative liabilities:
Counterparty A	$	—	$	—	$	—	$	—	$	—	$	—
Counterparty B	1,965		—		1,965		(1,027)		—		938
Total	$	1,965	$	—	$	1,965	$	(1,027)	$	—	$	938

6. Business Combinations

On March 12, 2021, the Company acquired Decibel Group London Ltd. (Decibel), a privately held company, for approximately $162.3 million in cash. This includes a $5.4 million payment related to the acceleration of certain stock options in conjunction with the acquisition, which was accounted for separately from the business combination, as post combination compensation cost, and recorded to general and administrative expenses within the unaudited consolidated statements of operations. Decibel is a leader in digital experience analytics that provides a single view of all customers and prospective customers across all channels.

On February 24, 2021, the Company acquired CheckMarket Inc. (CheckMarket), a privately held company, for a purchase price of $12.4 million in cash. CheckMarket is a survey solutions platform that helps customers automate the process to quickly make qualifications in the survey.

On September 14, 2020, the Company acquired Sense360 Inc. (Sense360), a privately held company, for a purchase price of $45.7 million in cash. Sense360 provides always-on, consumer and competitive intelligence from buyer and non-buyer segments and answers pressing questions such as what is driving traffic, what are the growth opportunities in a specific market and which competitors are gaining share and why.

On September 8, 2020, the Company acquired StellaServices Inc. (Stella Connect), a privately held company, for a purchase price of $99.6 million in cash. Stella Connect is a customer feedback and quality management platform that helps customer support teams to analyze and improve performance in real time.

On May 1, 2020, the Company acquired Voci Technologies, Inc. (Voci), a privately held company, for a purchase price of $59.6 million in cash. Voci is a real-time speech to text platform, that delivers a rich single view of the customer that can power an exceptional customer experience. Voci offers subscription on-premise software licenses which provide the customer with a right to use the software when made available.

On February 19, 2020, the Company acquired LivingLens Enterprise Ltd. (LivingLens), a privately held company, for a purchase price of $26.8 million in cash. LivingLens provides a video feedback platform to humanize feedback and bring the voice of the customer and employee to life.

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Notes to Unaudited Condensed Consolidated Financial Statements

The above transactions were each accounted for as business combinations. Accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date when control was obtained. The Company expensed all transaction costs in the period in which they were incurred. The fair value of developed technologies was determined using either the Multiple Period Excess Earnings Method or the Royalty Relief Method, the fair value of customer relationships was determined by using the Multiple Period Excess Earnings Method, the fair value of trademarks was determined using the Royalty Relief Method, and the fair value of backlog was determined using the Multiple Period Excess Earnings Method. The excess of the consideration paid over the fair value of the net liabilities assumed and identifiable intangible assets assumed is recorded as goodwill. The goodwill resulting from the acquisitions are largely attributable to the synergies expected to be realized. None of the goodwill recorded from the acquisitions will be deductible for income tax purposes.

The Company is in the process of settling working capital adjustments for Decibel, ~~CheckMarket,~~ Sense360, and Stella Connect ~~and Voci~~, and therefore the provisional measurements of identifiable assets and liabilities, and the resulting goodwill related to these acquisitions are subject to change and the final purchase price accounting could be different from the amounts presented herein.

The following table summarizes the purchase consideration, net of cash acquired, and the related fair values of the assets acquired and liabilities assumed (in thousands):

	Purchase Consideration, Net of Cash Acquired		Net Liabilities Assumed		Identifiable Intangible Assets		Goodwill
Decibel	$	153,960	$	(9,~~912~~709)	$	25,200	$	138,~~672~~469
CheckMarket	11,848		(1,486)		2,550		10,784
Sense360	45,273		(351)		10,500		35,124
Stella Connect	98,822		(3,478)		20,800		81,500
Voci	55,285		(1,385)		12,600		44,070
LivingLens	25,894		(715)		5,700		20,909

The following table sets forth each component of identifiable intangible assets acquired in connection with the acquisitions (in thousands):


	Developed Technology		Customer Relationships		Other(1)
Decibel	$	17,000	$	7,300	$	900
CheckMarket	1,300		1,200		50
Sense360	5,000		5,200		300
Stella Connect	9,400		10,000		1,400
Voci	7,700		4,600		300
LivingLens	3,100		2,200		400

(1) Other includes trademarks and backlog.

The useful lives of developed technology, customer relationships and other are five years, five years and one to five years, respectively.

The financial results for the above acquisitions are included in the Company's unaudited condensed consolidated financial statements from the date of acquisition through ~~April~~July 3031, 2021.

The pro forma impact of these acquisitions on unaudited consolidated revenue, income (loss) from operations and net loss was not material.

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

7. Goodwill and Intangible Assets, Net

Goodwill represents the excess of the purchase price in a business combination of the fair value of net assets acquired. Goodwill amounts are not amortized, but rather tested for impairment at least annually during the fourth quarter. The changes in goodwill are as follows (in thousands):

Balance as of January 31, 2020	$	79,324
Acquisitions	181,603
Foreign currency exchange	2,015
Balance as of January 31, 2021	262,942
Acquisitions	149,~~456~~253
Foreign currency exchange	82(1,742)
Balance as of April 30, 2021	$	412,480
Balance as of July 31, 2021	$	410,453

The changes in intangible assets for ~~the three months in~~ fiscal year 2022 and the net book value of intangible assets as of ~~April~~ July 3031, 2021 and January 31, 2021 were as follows (in thousands, except years):

	Intangible Assets, Gross						Accumulated Amortization						Intangible Assets, Net
	January 31, 2021		Identifiable Intangible Assets Acquired(1)		~~April~~July 3031, 2021		January 31, 2021		Amortization Expense		~~April~~July 3031, 2021		January 31, 2021		~~April~~July 3031, 2021		Weighted Average Remaining Useful Life (years)
Developed technology	$	44,191	$	18,~~332~~090	$	62,~~523~~281	$	(9,906)	$	(25,~~644~~641)	$	(1215,~~550~~547)	$	34,285	$	4946,~~973~~734	4.20
Customer relationships	27,485		8,~~537~~396		3635,~~022~~881		(3,747)		(13,~~633~~412)		(57,~~380~~159)		23,738		3028,~~642~~722		4.31
Other(2)	3,761		~~957~~941		4,~~718~~702		(1,161)		(~~625~~1,422)		(12,~~786~~583)		2,600		2,~~932~~119		2.13
	$	75,437	$	27,~~826~~427	$	~~103~~102,~~263~~864	$	(14,814)	$	(410,~~902~~475)	$	(1925,~~716~~289)	$	60,623	$	8377,~~547~~575	4.20

(1) Amounts also include any changes in intangible asset balances for the periods presented that resulted from foreign currency translation.

(2) Other includes trademarks and backlog.

The changes in intangible assets for fiscal year 2021 and the net book value of intangible assets as of January 31, ~~2020~~2021 and January 31, ~~2021~~2020 were as follows (in thousands, except years):


	Intangible Assets, Gross						Accumulated Amortization						Intangible Assets, Net
	January 31, 2020		Identifiable Intangible Assets Acquired(1)		January 31, 2021		January 31, 2020		Amortization Expense		January 31, 2021		January 31, 2020		January 31, 2021		Weighted Average Remaining Useful Life (years)
Developed technology	$	18,670	$	25,521	$	44,191	$	(3,473)	$	(6,433)	$	(9,906)	$	15,197	$	34,285	4.2
Customer relationships	5,237		22,248		27,485		(351)		(3,396)		(3,747)		4,886		23,738		4.3
Other(2)	1,320		2,441		3,761		(97)		(1,064)		(1,161)		1,223		2,600		2.6
	$	25,227	$	50,210	$	75,437	$	(3,921)	$	(10,893)	$	(14,814)	$	21,306	$	60,623	4.2

(1) Amounts also include any changes in intangible asset balances for the periods presented that resulted from foreign currency translation.

(2) Other includes trademarks and backlog.

The total amortization expense for intangible assets was $45.9 6 million and $110.45 million for the three and six months ended ~~April~~July 3031, 2021 and was $2.1 million and $3.5 million for the three and six months ended July 31, 2020, respectively.

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Future amortization expense related to the intangible assets is as follows (in thousands):

Year Ending January 31:
Remainder of 2022	$	1610,~~218~~486
2023	19,~~827~~777
2024	19,~~764~~673
2025	17,~~554~~470
2026	109,~~184~~591
Thereafter	—578
Total	$	8377,~~547~~575

8. Balance Sheet Components

Deferred Commissions

Sales commissions earned by the sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that the Company has determined to be five years. The Company determined the period of benefit by taking into consideration its customer contracts, technology and other factors. Sales commissions for renewal contracts (which are not considered commensurate with sales commissions for new revenue contracts) are deferred and amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in sales and marketing expenses in the consolidated statements of operations.

Commissions earned and capitalized during the three and six months ended ~~April~~July 3031, 2021 were $18.3 million and $28.1 million, respectively, and during the three and six months ended July 31, 2020 were $915.85 million and $419.27 million, respectively. Amortization expense for deferred commissions during the three and six months ended ~~April~~July 3031, 2021 were $8.8 million and $16.7 million, respectively and for the three and six months ended July 31, 2020 were $76.93 million and $612.43 million, respectively.

Property and Equipment, Net

The table below summarizes property and equipment which consists of the following (in thousands):

April 30, 2021

January 31, 2021

July 31, 2021

January 31, 2021

Computer equipment and software

7983,~~756~~960

77,257

Furniture, fixtures and equipment

~~993~~990

1,018

Leasehold improvements

6,~~322~~250

5,651

Finance leases, right-of-use assets

1820,~~314~~897

17,750

Construction-in-progress

41,~~827~~774

2,538

Total property and equipment, gross

~~110~~113,~~212~~871

104,214

Less accumulated depreciation and amortization

(6772,~~796~~968)

(63,546)

Property and equipment, net

4240,~~416~~903

40,668

Depreciation and amortization expense during the three and six months ended ~~April~~July 3031, 2021 totaled $5.6 million and $10.7 million, respectively, and during the three and six months ended July 31, 2020 totaled $54.12 million and $48.02 million, respectively,. ~~which~~This depreciation and amortization includes amortization of assets recorded under finance leases of $1.56 million and $13.0 million, for the three and six months ended ~~April~~July 3031, 2021, respectively, and $1.0 million and $1.9 million for the three and six months ended July 31, 2020, respectively.

Property and equipment located outside the U.S. was $1413.93 million and $15.7 million as of ~~April~~July 3031, 2021 and January 31, 2021, respectively.

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Accrued Expenses and Other Current Liabilities

The table below summarizes accrued expenses and other current liabilities which consists of the following (in thousands):

	April 30, 2021		January 31, 2021
	July 31, 2021		January 31, 2021
Finance lease liability, current	$	54,~~129~~965	$	5,349
Operating lease liability, current	10,~~263~~023		10,628
Federal, state and local taxes	57,~~710~~368		6,801
Indemnity holdback related to acquisitions	4,~~693~~460		1,748
Other	17,824		15,230
Professional services accrual related to the Merger	9,265		—
Accrued expenses and other current liabilities	$	43,619	$	39,756
Other	14,649		15,230
Accrued expenses and other current liabilities	$	50,730	$	39,756

Accrued Compensation

The table below summarizes accrued compensation which consists of the following (in thousands):

April 30, 2021

January 31, 2021

July 31, 2021

January 31, 2021

Accrued salaries and bonus

47,~~463~~145

7,856

Accrued commissions

813,~~590~~757

14,125

Accrued vacation

45,~~954~~983

4,425

Employee stock purchase plan

26,~~468~~425

6,389

Payroll taxes

1216,~~696~~551

9,497

Accrued compensation

3349,~~171~~861

42,292

9. Debt

Convertible Senior Notes

In September 2020, the Company issued 0.125% convertible senior notes (Notes) due September 15, 2025, for an aggregate principal amount of $575.0 million in a private placement to qualified institutional buyers. The Notes are senior unsecured obligations and interest is payable in cash in arrears at a fixed rate of 0.125% on March 15 and September 15 of each year, beginning on March 15, 2021. The Notes will mature on September 15, 2025, unless repurchased, redeemed, or converted pursuant to the terms of the Notes. As described below, at the effective time of the Merger, holders of the Notes can require us (the surviving entity following the Merger) to repurchase their Notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued interest. Holders may also elect to surrender their Notes for conversion upon effectiveness of the Merger.

The terms of the Notes are governed by an Indenture (the Indenture) by and between the Company and U.S. Bank National Association, as trustee.

The initial conversion rate of the Notes is 25.4113 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $39.35 per share of common stock. The conversion rate is subject to adjustment upon the occurrence of certain specified events in accordance with the Indenture.

The Company may redeem for cash all or any portion of the Notes, at its option, on or after September 20, 2023 and prior to the 41st scheduled trading day immediately preceding the maturity date, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereto, but excluding, the redemption date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides written notice of redemption. No sinking fund is provided for the Notes.21

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Holders of the Notes may convert all or a portion of their Notes prior to the close of business on the business day immediately preceding June 15, 2025 in multiples of $1,000 principal amount, only under the following circumstances (the conditional conversion feature):

•during any fiscal quarter commencing after January 31, 2021 and only during such fiscal quarter, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the Notes on each applicable trading day;

•during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of the Notes for such trading day was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate of the Notes on each such trading day;

•upon the Company’s notice that it is redeeming any Notes, the Notes the Company calls for redemption (or, at the Company’s election, all outstanding Notes) may be converted at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or

•upon the occurrence of specified corporate events, including the Merger, as described in the Indenture.

On or after June 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes, holders of the Notes may convert all or any portion of their Notes regardless of the foregoing conditions, and such conversions will settle upon maturity. Upon conversion, the Company will pay or deliver, as the case may be, either cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

Holders of the Notes who convert their Notes in connection with such make-whole fundamental change (as defined in the Indenture), including in connection with the Merger, or during the relevant redemption period (~~each~~ as defined in the Indenture) are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, upon the occurrence of a fundamental change (as defined in the Indenture), including the Merger, prior to the maturity date, subject to certain conditions, holders of the Notes may require the Company to repurchase all or a portion of the Notes for cash at a price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date (as defined in the Indenture).

Subsequent to the adoption of ASU 2020-06, the Company combined the conversion feature with the host contract and accounts for the Notes as a single liability. The Company recorded the total amount of issuance costs as a reduction to the convertible senior notes, net in the unaudited condensed consolidated balance sheets. The issuance costs are amortized to interest expense over the term of the Notes using the effective interest rate method.

As of ~~April~~July 3031, 2021, the Notes are classified as noncurrent in the unaudited condensed consolidated balance sheets since the criteria for conversion was not met.

The net carrying amount of the Notes recorded in convertible senior notes, net in the unaudited condensed consolidated balance sheets was as follows (in thousands):

	April 30, 2021
Principal	$	575,000
Unamortized issuance costs	(14,724)
Net carrying amount of the liability component	$	560,276

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements


	July 31, 2021
Principal	$	575,000
Unamortized issuance costs	(13,895)
Net carrying amount of the liability component	$	561,105

The following table sets forth the interest expense related to the Notes recognized in other income (expense), net on the unaudited condensed consolidated statements of operations (in thousands):

	Three Months Ended April 30, 2021
	Three Months Ended July 31, 2021		Six Months Ended July 31, 2021
Contractual interest expense	$	180	$	360
Amortization of issuance costs	~~827~~829		1,656
Total interest expense related to the Notes	$	1,~~007~~009	$	2,016

Capped Call Transactions

In connection with the offering of the Notes, the Company entered into privately negotiated capped call transactions (the Capped Calls) with respect to its common stock at a cost of approximately $61.9 million. The Capped Calls each have an initial strike price of approximately $39.35 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls cover, subject to anti-dilution adjustments, approximately 14.6 million shares of the Company’s common stock. The Capped Calls were purchased in order to reduce or offset the potential dilution to the Company’s common stock upon any conversion of the Notes, subject to a cap of $58.30 per share and certain adjustments. The Capped Calls settle in components with the last component scheduled to expire on September 11, 2025 and are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event; such as the Merger, a tender offer; and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including changes in law, failures to deliver, insolvency filings, and hedging disruptions.

The Capped Calls are separate transactions and are not part of the terms of the Notes. The $61.9 million paid for the Capped Calls was included as a reduction to additional paid-in capital on the unaudited condensed consolidated balance sheets because they are not designated as separate derivative financial instruments.

Wells Fargo Bank Credit Facility

On September 4, 2020, the Company entered into the Wells Fargo Bank, National Association (Wells Fargo) credit facility to provide for a senior secured revolving line of credit of up to $50.0 million with the right (subject to certain conditions) to add incremental revolving commitments of up to $50.0 million in the aggregate. The revolving line of credit provides a sublimit of up to $40.0 million to be available for the issuance of letters of credit. The outstanding balance, if any, is due at the maturity date in September 2023. 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 of LIBOR plus 1.75%. Loans based on the base rate shall bear interest at a rate of the base rate plus 0.75%. The Company is required to pay a commitment fee equal to 0.25% per annum on the undrawn portion available under the revolving line of credit. As of ~~April 30~~July 31, 2021, no amounts were outstanding on this credit facility.

As of ~~April~~July 3031, 2021, $50.0 million was available for borrowing under the revolving line of credit. As of ~~April~~July 3031, 2021, the Company was in compliance with the financial covenants contained in the revolving line of credit.

Silicon Valley Bank Credit Facility

The Company maintained a revolving line of credit that matured in September 2020, and provided for aggregate borrowings of up to $50.0 million. On September 4, 2020, the Company paid all outstanding amounts owing under the Silicon Valley Bank revolving line of credit and terminated the credit facility. The Company ~~continues to have unsecured letters of credit issued by Silicon Valley Bank in the face amount of $4.7 million outstanding as of April 30, 2021.~~

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

continues to have unsecured letters of credit issued by Silicon Valley Bank in the face amount of $4.9 million outstanding as of July 31, 2021.

10. Leases

The Company has entered into operating leases primarily for office facilities and finance leases primarily for equipment purchases. These leases have terms which typically range from 1 year to 10 years.

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During the year ended January 31, 2021, the Company recorded aggregate impairment charges of $16.8 million, of which $13.5 million relates to the impairment of right -of-use (ROU) assets related to certain vacant office leases and $3.3 million related to the impairment of leasehold improvements. The Company has the intent and ability to sub-lease vacant office facilities which it has ceased using and as such, has considered estimated future sub-lease income including the consideration of the local real estate market conditions, in measuring the amount of the ROU assets impairment. The Company also factored into its estimate the time to identify a tenant and to enter into an agreement. Impairment charges were recorded to general and administrative expenses within the unaudited condensed consolidated statement of operations.

The components of lease expense were as follows (in thousands):

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Operating lease costs	$	2,462	$	~~2,789~~	$	3,014	$	~~2,832~~	$	5,251	$	5,846
Finance lease costs:
Amortization of assets	$	1,555	$	~~1,492~~	$	968	$	~~967~~	$	3,047	$	1,935
Interest on lease liabilities	134		~~140~~		127		~~144~~		274		271
	$	1,689	$	~~1,632~~	$	1,095	$	~~1,111~~	$	3,321	$	2,206

Supplemental cash flow information related to operating and finance leases were as follows (in thousands):

	Three Months Ended April 30,
	Six Months Ended July 31,
	2021		2020
Operating leases:
Cash paid for operating lease liabilities	$	36,~~196~~310	$	24,~~073~~428
Right-of-use assets obtained in exchange for lease obligations	—		1819,~~294~~342
Finance leases:
Finance leases obtained for equipment	$	13,~~190~~818	$	—3,954

Supplemental balance sheet information related to operating leases was as follows (in thousands, except lease term and discount rate):

	April 30, 2021			January 31, 2021
	July 31, 2021			January 31, 2021
Operating lease liabilities reported as:
Accrued expenses and current liabilities	$	10,~~263~~023		$	10,628
Lease liability, noncurrent	4543,~~285~~181			47,631
Total operating lease liabilities	$	5553,~~548~~204		$	58,259
Weighted average remaining lease term (in years)	5.53			5.5
Weighted average discount rate	4.8		%	4.8		%

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Supplemental balance sheet information related to finance leases was as follows (in thousands, except lease term and discount rate):

	April 30, 2021			January 31, 2021
	July 31, 2021			January 31, 2021
Finance lease liabilities reported as:
Accrued expenses and current liabilities	$	54,~~129~~965		$	5,349
Other liabilities	45,~~908~~989			5,004
Total finance lease liabilities	$	10,~~037~~954		$	10,353
Weighted average remaining lease term (in years)	2.45			2.3
Weighted average discount rate	5.63		%	5.5		%

Future minimum lease payments under operating leases and finance leases as of ~~April 30~~July 31, 2021 are presented in the table below (in thousands):

April 30, 2021

Operating leases

Finance leases

Year Ending January 31,

Remainder of 2022

85,~~653~~729

43,~~435~~035

2023

11,~~950~~928

23,~~933~~858

2024

11,~~749~~727

23,~~176~~120

2025

10,~~878~~857

1,~~158~~674

2026

8,~~973~~952

1823

Thereafter

11,~~693~~670

—

Total future lease payments

6360,~~896~~863

1011,~~720~~710

Less interest payments

(87,~~348~~659)

(~~683~~756)

Total present value of minimum lease payments

5553,~~548~~204

10,~~037~~954

11. Commitments and Contingencies

Purchase obligations

The Company has unconditional purchase commitments, primarily related to distribution fees, software license fees and marketing services, of $2730.61 million as of ~~April 30~~July 31, 2021, of which $76.90 million, $78.53 million, $810.34 million and $35.94 million are expected to be settled during fiscal years 2022, 2023, 2024 and 2025, respectively.

Warranties, Indemnification, and Contingent Obligations

The Company's arrangements generally include provisions indemnifying customers against liabilities if their customer data is compromised due to a breach of information security, or if the Company's applications or services infringe a third-party's intellectual property rights. To date, the Company has not incurred any costs as a result of such indemnification and has not accrued any liabilities related to such obligations in the consolidated financial statements.

The Company enters into service level agreements with customers which warrant defined levels of uptime and support response times and permit those customers to receive credits for prepaid amounts in the event that those performance and response levels are not met. To date, the Company has not experienced any significant failures to meet defined levels of performance and response. In connection with the service level agreements, the Company has not incurred any significant costs and has not accrued any liabilities in the consolidated financial statements. The Company's subscription services agreements also generally include a warranty that the service performs in accordance with the applicable specifications document. The Company's professional services are generally warranted to be performed in a professional manner and in a manner that will comply with the terms of the customer agreements. To date, the Company has not incurred any material costs associated with these warranties.

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

12. Income Taxes

Provision for income taxes consists of U.S. federal and state income taxes and income taxes on foreign jurisdictions in which the Company conducts business and foreign withholding taxes. The Company maintains a full valuation allowance on its federal, state and certain foreign deferred tax assets that it has determined are not realizable on a more likely than not basis.

Income tax expense increased by $0.8 7 million during the three months ended ~~April~~July 3031, 2021 compared to the three months ended ~~April~~July 3031, 2020. This was primarily attributed to ~~higher~~excess ~~foreign~~tax benefits from stock-based compensation deductions in the United Kingdom and the tax benefit realized from the acquisition of Voci during the comparative three months ended July 31, 2020. During the six months ended July 31, 2021, income ~~taxes~~tax expense increased by $1.5 million, as compared to the six months ended July 31, 2020, primarily due to excess tax benefits from stock-based compensation deductions in the United Kingdom and the tax benefit realized from the acquisition of Voci during the comparative six months ended July 31, 2020.

13. Equity Incentive Plans

The Equity Incentive Plan activity is as follows:

Three Months Ended April 30,

Six Months Ended July 31,

2021

2020

Opening balance

26,700,713

23,050,732

Shares authorized (1)

7,749,791

6,617,320

RSUs granted

(3,~~386~~734,~~257~~490)

(23,~~828~~491,~~278~~910)

Cancelled shares

~~629~~1,~~208~~066,633

~~568~~944,~~255~~366

Ending balance

31,~~693~~782,~~455~~647

27,~~408~~120,~~029~~508

(1) Reflects an automatic increase to the number of shares of common stock reserved for issuance pursuant to future awards under the 2019 Equity Incentive Plan (the 2019 Plan) This annual increase is provided for in the 2019 Plan.

The stock-based compensation expense by line item in the consolidated statements of operations is summarized as follows (in thousands):

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Cost of subscription revenue	$	1,105	$	~~854~~	$	946	$	~~909~~	$	1,959	$	1,855
Cost of professional services revenue	3,282		~~2,218~~		2,719		~~2,684~~		5,500		5,402
Research and development expense	5,944		~~4,430~~		4,746		~~11,473~~		10,374		16,219
Sales and marketing expense	11,945		~~9,581~~		8,745		~~9,335~~		21,526		18,081
General and administrative expense	7,421		~~6,518~~		7,478		~~7,403~~		13,939		14,881
Total stock-based compensation	$	29,697	$	~~23,601~~	$	24,634	$	~~31,804~~	$	53,298	$	56,438

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Medallia, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Restricted Stock Units Activity

The following table summarizes restricted stock ~~unit~~units ~~activities~~activity:

	Restricted Stock Units	~~Restricted Stock Units~~					Performance Based Restricted Stock Units	~~Performance Based Restricted Stock Units~~
	Number of Shares	~~Number of Shares~~	Weighted Average Grant Date Fair Value		~~Weighted Average Grant Date Fair Value~~		Number of Shares	~~Number of Shares~~	Weighted Average Grant Date Fair Value		~~Weighted Average Grant Date Fair Value~~
Balance as of January 31, 2021	7,753,348	~~7,753,348~~	$	20.61	~~20.61~~		1,048,453	~~1,048,453~~	$	19.79	~~19.79~~
Stock units granted	3,487,986	~~3,169,406~~	29.74		~~29.90~~		246,504	~~216,851~~	29.76		~~29.92~~
Stock units vested	(2,375,494)	~~(1,159,636)~~	19.32		~~18.35~~		—	—	—		—
Stock units cancelled and expired	(686,810)	~~(341,147)~~	25.06		~~22.52~~		(121,960)	~~(102,271)~~	25.13		~~24.83~~
Balance as of April 30, 2021		9,421,971			$	23.94		1,163,033			$	19.41
Balance as of July 31, 2021	8,179,030		$	24.50			1,172,997		$	18.57

As of ~~April~~July 3031, 2021, total unrecognized compensation expense related to the RSUs was $~~199~~177.52 million and will be recognized over a weighted-average remaining period of 2.42 years. Certain RSUs, in addition to the satisfaction of the service-based performance vesting conditions, also require the fulfillment of performance vesting conditions which include subscription revenue growth targets and a combination of subscription revenue growth and operating margin targets.

Option Activity

The following table summarizes the stock option activity:

	Options Outstanding	~~Options Outstanding~~
	Number of Shares	~~Number of Shares~~	Average Exercise Price per Share		~~Average Exercise Price per Share~~		Weighted Average Remaining Contractual Term (years)	~~Weighted Average Remaining Contractual Term (years)~~	Aggregate Intrinsic Value (in thousands)		~~Aggregate Intrinsic Value (in thousands)~~
Balance as of January 31, 2021	24,337,528	~~24,337,528~~	$	5.98	$	~~5.98~~	6.85	~~6.85~~	$	864,527	$	~~864,527~~
Options exercised	(2,889,315)	~~(1,538,769)~~	5.25		~~4.99~~				82,698		~~37,715~~
Options cancelled or expired	(257,863)	~~(185,790)~~	6.55		~~6.59~~
Balance as of April 30, 2021		22,612,969			$	6.04		6.70			$	530,272
Balance as of July 31, 2021	21,190,350		$	6.07			6.50		$	589,100
Exercisable as of April 30, 2021		16,287,398			$	5.83		6.43			$	385,410
Exercisable as of July 31, 2021	16,201,529		$	5.91			6.30		$	453,026

The grant date fair value of stock options vested during the ~~three~~six months ended ~~April~~July 3031, 2021 and 2020 was $37.60 million and $712.67 million, respectively. As of ~~April~~July 3031, 2021, total unrecognized compensation expense related to stock options was $1713.79 million, which is expected to be recognized over a weighted-average remaining recognition period of 1.21 years.

Employee Stock Purchase Plan

The fair value of each Employee Stock Purchase Plan (ESPP) share is estimated on the enrollment date of the offering period using the Black-Scholes-Merton option-pricing model using the assumptions noted in the following table:

	April 30, 2021
	July 31, 2021
Risk-free interest rate	0.1	%
Expected volatility	64	%
Expected term (in years)	0.5
Expected dividend rate	—

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Table of Contents

~~The fair value of stock purchase rights to be granted under the ESPP during the six-month period from March 16~~Medallia, ~~2021 to September 15, 2021 was $9~~Inc.~~62 per share. As of April 30, 2021 the Company had $2.4 million of unrecognized compensation expense related to ESPP subscriptions that will be recognized over 0.4 years.~~

Notes to Unaudited Condensed Consolidated Financial Statements

The fair value of stock purchase rights to be granted under the ESPP during the six-month period from March 16, 2021 to September 15, 2021 was $9.62 per share. As of July 31, 2021 the Company had $0.6 million of unrecognized compensation expense related to ESPP subscriptions that will be recognized over 0.1 years.

14. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Net loss attributable to common stockholders	$	(62,490)	$	~~(52,421)~~	$	(35,198)	$	~~(32,529)~~	$	(114,911)	$	(67,727)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	159,068		~~156,364~~		142,479		~~135,993~~		157,738		139,272
Net loss per share attributable to common stockholders, basic and diluted	$	(0.39)	$	~~(0.34)~~	$	(0.25)	$	~~(0.24)~~	$	(0.73)	$	(0.49)

The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive are as follows (in thousands):

		Three Months Ended April 30,
	Three Months Ended July 31,				Six Months Ended July 31,
	2021	~~2021~~	2020	~~2020~~	2021	2020
Stock options	21,190	~~22,613~~	31,512	~~36,454~~	21,190	31,512
Restricted stock units	9,352	~~10,585~~	10,200	~~10,731~~	9,352	10,200
ESPP	342	~~342~~	513	~~513~~	342	513
Convertible senior notes (if-converted)	14,611	~~14,611~~	—	—	14,611	—
Total	45,495	~~48,151~~	42,225	~~47,698~~	45,495	42,225

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties as discussed in “Special Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q.

Overview

Medallia, Inc. was founded in 2001 to help the world’s largest companies understand and improve customer experiences at scale. In doing so, we created a new category of enterprise software, experience management.

Our SaaS (software-as-a-service) platform, the Medallia Experience Cloud, is built on modern technology and open architecture, utilizing artificial intelligence (AI) and machine learning to analyze massive amounts of data. We capture experience data from the expanding signal fields emitted by customers and employees on their daily journeys so that our customers can understand, analyze, and act upon omni-channel experiences. We believe that Medallia is the only platform that makes all other applications customer and employee aware. We utilize our proprietary in-memory analytics, dynamic organizational hierarchy management, and AI technology to analyze the structured and unstructured data at great scale with enterprise grade security and privacy deriving themes and predictive insights that drive action in live time. Using our technology, enterprises reduce churn, turn detractors into promoters and buyers, and create in-the-moment cross-sell and up-sell opportunities, providing high returns on investment.

Our platform captures and analyzes over 7.5 billion experiences annually. Our products have high adoption rates and are used extensively from the front line to the C-Suite; over ~~half~~35% of our customers have more than 1,000 employees using our platform. Our platform is deeply embedded in an enterprise’s tech stack, with enterprises integrating Medallia with more than 25 other business applications. We believe this is significantly higher adoption than other experience management solutions available in the market.

We offer our platform through a SaaS business model. We use a “land-and-expand” model, whereby once customers have deployed our platform, they often increase the number of end-users through expansion to additional business units and geographies, and they also purchase more modules. We focus our selling efforts on both business leaders who are often making a strategic purchase of our platform with the potential for broad use throughout their enterprises, as well as functional leaders purchasing for their teams. We price our subscriptions based on the functionality and capacity needs of our customers. Subscription periods for our customers generally range from one to three years and we customarily invoice customers in advance in annual installments.

In December 2019 a novel strain of Coronavirus disease (COVID-19) was reported and in March 2020 the World Health Organization (WHO) characterized the COVID-19 as a pandemic. The COVID-19 pandemic has impacted our business, and its full impact is still uncertain and may continue to negatively affect our subscription bookings and results of operations in future periods. The extent to which the COVID-19 pandemic may impact our future financial condition or results of operations remains uncertain. Also, we may experience curtailed customer demand for our platform, reduced customer spending or contract duration or lengthened payment terms that could materially adversely impact our business, results of operations and overall financial performance in future periods. While our subscription revenue is relatively predictable, the effect of the COVID-19 pandemic, along with the seasonality we historically experience, may not be fully reflected in our results of operations and overall financial performance until future periods.

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The extent and continued impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration, ~~and~~ spread or resurgence of the outbreak; government responses to the pandemic; impact on our customers' and our sales cycles; impact on our customer, industry or employee events; extent of delays in hiring and onboarding new employees; how quickly and to what extent normal economic and operating activities can resume; speed of rollout of COVID-19 vaccines, lifting of restrictions on movement, and normalization of full-time return to work and social events; and effect on our partners and vendors, all of which are uncertain and difficult to predict. In response to the COVID-19 pandemic, we have temporarily closed most of our offices (including our headquarters), mandated our employees to work remotely, implemented travel restrictions for all non-essential business, and shifted certain of our customer, industry, analyst, investor, and employee events, including our Medallia Experience conference, to virtual-only, and we may similarly alter, postpone or cancel events in the future. These changes remained in effect in the first ~~quarter~~and second quarters of fiscal year 2022 and could extend into future quarters. The impact, if any, of these and any additional operational changes we may implement is uncertain but changes we have implemented have not affected and are not expected to affect our ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures. See the section “Risk Factors” for further discussion of the impact and possible continued impact of the COVID-19 pandemic on our business.

Pending Merger

On July 25, 2021, we entered into the Merger Agreement with Parent and Merger Sub. The Merger Agreement provides for our acquisition by entities affiliated with Thoma Bravo in an all cash transaction valued at $6.4 billion.

Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of our common stock (except for certain shares specified in the Merger Agreement) will be canceled and automatically converted into the right to receive cash in an amount equal to $34.00 per share, without interest.

Completion of the Merger is subject to the satisfaction of certain terms and conditions set forth in the Merger Agreement, including (i) approval of the Merger Agreement by our stockholders; (ii) the absence of any law or order restraining, enjoining or otherwise prohibiting the Merger; and (3) the expiration or termination of the waiting period under the United States Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and clearance under the antitrust laws of certain non-United States jurisdictions. A special meeting of the Company’s stockholders to consider and vote on the proposal to adopt the Merger Agreement will take place subsequent to the expiration of the “go-shop” period, which expires on September 4, 2021. The Merger is expected to close in calendar year 2021. Upon consummation of the Merger, our common stock will no longer be listed on any public market.

Key Business Metrics

We review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

Customers

We measure and track the number of customers, and we believe the number of customers is useful information to investors, because our ability to attract new customers, grow our customer base and retain existing customers helps drive our success and is an important contributor to our revenue growth. We have successfully demonstrated a history of growing our customer base. We define the number of customers at the end of any particular period as the number of customers with active annual subscription agreements that run through the current or future period. In situations where a customer has multiple subsidiaries or divisions, each entity that is invoiced as a separate entity is treated as a separate customer. As of ~~April~~July 3031, 2021 and ~~April 30,~~ 2020, we had 1,~~244~~340 and ~~782~~839 enterprise customers, respectively. If we count as a single enterprise customer, all subsidiaries and divisions of a single parent, then as of ~~April~~July 3031, 2021 and ~~April 30,~~ 2020, we had ~~904~~984 and ~~528~~590 enterprise customers, respectively.

We also serve a variety of small and mid-size businesses that prove our products applicability across all levels of the market.

Our use of customer count may have certain limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue or an analysis of our results as reported under GAAP. For example, other companies, including companies in our industry, may calculate number of customers differently, which could reduce its usefulness as a comparative measure.

Subscription Billings

Subscription billings on a trailing 12-month basis also ~~helps~~help investors better understand our subscription sales activity for a particular period, which is not necessarily reflected in our subscription revenue given that we recognize subscription revenue ratably over the subscription term.

We define subscription billings, a non-GAAP financial measure, as total subscription revenue plus the change in subscription deferred revenue and contract assets, excluding contract assets acquired. We measure subscription billings on a trailing 12-month basis because subscription billings vary from quarter to quarter due to invoice timing. Subscription billings in any particular period reflect amounts invoiced for subscriptions to access our platform. We typically invoice our customers annually in advance for subscriptions to our platform.

The following table sets forth our subscription billings and growth rate, and provides a reconciliation of subscription revenue to subscription billings, for the periods presented:

	Trailing Twelve Months Ended April 30,
	Trailing Twelve Months Ended July 31,
	2021		2020
	(in thousands, except percentages)
Subscription revenue	$	~~399~~424,~~653~~214	$	~~329~~347,~~448~~731
Increase in subscription deferred revenue	3952,~~830~~712		3634,~~632~~450
(Increase) decrease in contract assets	(4,842)		1,373
(Increase) in contract assets	(4,885)		(2,448)
Subscription billings	$	~~434~~472,~~641~~041	$	~~367~~379,~~453~~733
Subscription billings growth rate	1824%		2320%

Our use of subscription billings has certain limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue or an analysis of our results as reported under GAAP. Subscription billings are recognized when invoiced, while the related subscription revenue is recognized ratably over the subscription term. For the ~~first~~second quarter of fiscal year 2022, our trailing 12-month subscription billings growth rate was 1824%. There are a wide variety of factors that influence this metric. For example, due to the COVID-19 pandemic, we have modified subscription terms, flexible payment or invoicing terms in exchange for extensions of existing contracts for certain customers hardest hit by the pandemic. Therefore, fluctuations in billings should not be taken as an indication of changes in future revenue. Also, other companies, including companies in our industry, may not use subscription billings, may calculate subscription billings differently, may have different billing frequencies, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of subscription billings as a comparative measure.

Dollar-based Net Revenue Retention

We use a dollar-based net revenue retention rate to measure our ability to retain and expand business generated from our existing customers. Our dollar-based net revenue retention rate compares our subscription revenue from the same set of customers across comparable periods, calculated on a trailing twelve-month basis. We focus on a dollar-based net revenue retention rate metric, and we believe it is useful information to investors, because it captures the full impact on revenue of customers expanding, decreasing or ending their subscriptions. Our dollar-based net revenue retention rate as of ~~April~~July 3031, 2021 and 2020 was ~~111~~112% and 117% respectively, on a trailing twelve-month basis.

We calculate our dollar-based net revenue retention rate by dividing (i) subscription revenue in the trailing 12-month period from those customers who were on our platform during the prior 12-month period by (ii) subscription revenue from the same customers in the prior trailing 12-month period. For the purposes of calculating our dollar-based net revenue retention rate, we count as customers all parent companies of each billing entity enterprise. We believe that our ability to retain customers and expand their use of our platform over time is an indicator of the stability of our revenue base and the long-term value of our relationships with customers. If our dollar-based net revenue retention rate for a period exceeds 100%, this means that the subscription revenue retained during the period, which includes up-sells and cross-sells, more than offset the subscription revenue lost from customers that did not renew all or a portion of their contracts with us during that period.

our dollar-based net revenue retention rate, we count as customers all parent companies of each billing entity enterprise. We believe that our ability to retain customers and expand their use of our platform over time is an indicator of the stability of our revenue base and the long-term value of our relationships with customers. If our dollar-based net revenue retention rate for a period exceeds 100%, this means that the subscription revenue retained during the period, which includes up-sells and cross-sells, more than offset the subscription revenue lost from customers that did not renew all or a portion of their contracts with us during that period.

Our use of dollar-based net revenue retention rate may have certain limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue or an analysis of our results as reported under GAAP. For example, other companies, including companies in our industry, may calculate dollar-based net revenue retention rate differently, which could reduce its usefulness as a comparative measure.

Components of Results of Operations

Revenue

We generate revenue from sales of subscriptions and related professional services. Professional services include managed services and implementation and other services. For all periods presented, we have relied on sales of our platform to large enterprises for a significant majority of our revenue.

Subscription revenue is recognized ratably over the related contractual term, generally beginning on the date that our platform is made available to a customer. In general, our agreements are non-cancellable and we primarily bill in advance annually for our multi-year contracts. Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized. Subscription revenue as a percentage of total revenue may vary from period to period.

Professional services revenue includes fees associated with managed services and one-time implementation and other services. Managed services support our customers by providing a range of ongoing services, including program design, launch, enhancements, expansion and analytics. Managed services are typically sold on a fixed-fee recurring basis. Managed services are a stand-ready obligation to perform these services over the term of the arrangement and as a result, revenue is recognized ratably over the term of the arrangement.

Implementation and other services are sold on a fixed-fee or time-and-materials basis and consist primarily of initial design, integration and configuration services. In addition, we provide advisory services that enable customers to gain insightful business information through data analysis and our institute training programs. Implementation and other services revenue are recognized as services are performed.

As we continue to increase the number of partners that provide implementation and advisory services, we generally expect professional services revenue to decrease as a percentage of total revenue in the long term, although this percentage may vary from period to period.

Cost of Revenue, Gross Profit and Gross Margin

Cost of Subscription Revenue

Cost of subscription revenue primarily consists of software, hardware and hosting costs, personnel-related expenses including stock-based compensation expense, travel expense and allocated overhead costs for our subscription operations, third-party costs and security and customer support departments including outside services.

Cost of Professional Services Revenue

Cost of professional services revenue primarily consists of personnel-related expenses including stock-based compensation expense, travel expense and allocated overhead costs associated with the delivery of ~~managed services, implementation and other service offerings, facility costs, sub-contractor costs and outside services.~~

managed services, implementation and other service offerings, facility costs, sub-contractor costs and outside services.

We expect our cost of revenue will increase in absolute dollars in future periods as we continue to invest in our business and may vary from period to period as a percentage of revenue.

Gross Profit and Gross Margin

Gross profit is total revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may vary from period to period as our mix or cost of revenue fluctuates. Our gross margin on subscription revenue is significantly higher than our gross margin on professional services revenue, which is close to break-even. In addition, we may experience changes in our professional services gross margin due to the timing of delivery of implementation and other services. We expect our gross margin may vary from period to period and increase modestly in the long term.

due to the timing of delivery of implementation and other services. We expect our gross margin may vary from period to period and increase modestly in the long term.

Operating Expenses

Research and Development

Research and development expenses primarily consists of personnel-related expenses including stock-based compensation expense, travel expense and allocated overhead costs, facility costs, software and hardware costs and depreciation. Our research and development efforts focus on maintaining and enhancing functionality of existing services and adding new products and features. We believe that continued investment in our platform is important for our growth. Although we expect our research and development expenses will increase in absolute dollars in future periods and may vary from period to period as a percentage of revenue in the near term, we expect that research and development expenses will decline as a percentage of revenue in the long term.

Sales and Marketing

Sales and marketing expenses primarily consists of personnel-related expenses including stock-based compensation expense, travel expense and allocated overhead expenses and marketing and promotional activities expenses including our annual Experience conference, advertising, facility and training costs. Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer and are deferred and amortized on a straight-line basis over the expected period of benefit. We intend to continue to invest in sales and marketing to help drive the growth of our business. During the short term we expect to see a decline in travel expenses as well as certain of our marketing costs such as the Experience conference due to the COVID-19 pandemic as we focus our marketing and sales events on virtual platforms. However, we expect our sales and marketing expenses will increase in future periods as we ramp up our sales efforts.

General and Administrative

General and administrative expenses primarily consist of personnel-related expenses including stock-based compensation expense, travel expense and overhead costs, and facility costs and outside services. General and administrative expenses also include restructuring costs from subleasing of certain of our office spaces. We expect to incur additional general and administrative expenses due to ~~support~~ the Merger in calendar year 2021, to support growth of the Company as well as ~~our~~to support the transition back to being a ~~publicly~~private ~~traded~~ company. We expect that general and administrative expenses will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.

Other Income (Expense), net

Other income (expense), net consists primarily of interest expense, amortization of the issuance costs on the convertible senior notes, and net foreign currency exchange gains (losses). In addition, interest income includes interest on our cash and marketable securities balances.

Provision For Income Taxes

Provision for income taxes consists of U.S. federal and state income taxes and income taxes on foreign jurisdictions in which we conduct business and foreign withholding taxes. We maintain a full valuation allowance on our federal, state and certain foreign deferred tax assets that we have determined are not realizable on a more likely than not basis. For additional information regarding our income taxes, see "Note 12: Income Taxes," included in this Quarterly Report on Form 10-Q, in our notes to the unaudited condensed consolidated financial statements.

Results of Operations

The following table sets forth our unaudited condensed consolidated statements of operations data for the periods indicated (in thousands):

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Revenue:
Subscription	$	117,392	$	~~106,071~~	$	92,831	$	~~88,992~~	$	223,463	$	181,823
Professional services	26,716		~~25,303~~		22,694		~~23,699~~		52,019		46,393
Total revenue	144,108		~~131,374~~		115,525		~~112,691~~		275,482		228,216
Cost of revenue:
Subscription(1)	27,592		~~24,156~~		19,130		~~17,344~~		51,748		36,474
Professional services(1)	26,931		~~23,542~~		22,042		~~22,219~~		50,473		44,261
Total cost of revenue	54,523		~~47,698~~		41,172		~~39,563~~		102,221		80,735
Gross profit	89,585		~~83,676~~		74,353		~~73,128~~		173,261		147,481
Operating expenses:
Research and development(1)	35,363		~~30,637~~		27,790		~~32,379~~		66,000		60,169
Sales and marketing(1)	80,150		~~72,980~~		51,942		~~52,015~~		153,130		103,957
General and administrative(1)	33,909		~~30,113~~		29,137		~~21,498~~		64,022		50,635
Total operating expenses	149,422		~~133,730~~		108,869		~~105,892~~		283,152		214,761
Loss from operations	(59,837)		~~(50,054)~~		(34,516)		~~(32,764)~~		(109,891)		(67,280)
Other income (expense), net	(1,716)		~~(1,593)~~		(448)		~~175~~		(3,309)		(273)
Loss before provision for income taxes	(61,553)		~~(51,647)~~		(34,964)		~~(32,589)~~		(113,200)		(67,553)
Provision for (benefits from) income taxes			774				(60)
Provision for income taxes	937				234				1,711		174
Net loss	$	(62,490)	$	~~(52,421)~~	$	(35,198)	$	~~(32,529)~~	$	(114,911)	$	(67,727)

(1) Includes stock-based compensation expense as follows (in thousands):

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Cost of subscription revenue	$	1,105	$	~~854~~	$	946	$	~~909~~	$	1,959	$	1,855
Cost of professional services revenue	3,282		~~2,218~~		2,719		~~2,684~~		5,500		5,402
Research and development expense	5,944		~~4,430~~		4,746		~~11,473~~		10,374		16,219
Sales and marketing expense	11,945		~~9,581~~		8,745		~~9,335~~		21,526		18,081
General and administrative expense	7,421		~~6,518~~		7,478		~~7,403~~		13,939		14,881
Total stock-based compensation	$	29,697	$	~~23,601~~	$	24,634	$	~~31,804~~	$	53,298	$	56,438

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The following table sets forth our unaudited condensed consolidated statements of operations data expressed as a percentage of total revenue for the periods indicated:

			Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		2021		2020
Revenue:
Subscription	81	%	81	%	80	%	79	%	81	%	80	%
Professional services	19	%	19	%	20	%	21	%	19	%	20	%
Total revenue	100	%	~~100~~	%	100	%	~~100~~	%	100	%	100	%
Cost of revenue:
Subscription	19	%	18	%	17	%	15	%	19	%	16	%
Professional services	19	%	18	%	19	%	20	%	18	%	19	%
Total cost of revenue	38	%	36	%	36	%	35	%	37	%	35	%
Gross profit	62	%	64	%	64	%	65	%	63	%	65	%
Operating expenses:
Research and development	25	%	23	%	24	%	29	%	24	%	26	%
Sales and marketing	56	%	56	%	45	%	46	%	56	%	46	%
General and administrative	24	%	23	%	25	%	19	%	23	%	22	%
Total operating expenses	104	%	~~102~~	%	94	%	94	%	103	%	94	%
Loss from operations	(42)	%	~~(38)~~	%	(30)	%	~~(29)~~	%	(40)	%	(29)	%
Other income (expense), net	(1)	%	~~(1)~~	%	—	%	—	%	(1)	%	—	%
Loss before provision for income taxes	(43)	%	~~(39)~~	%	(30)	%	~~(29)~~	%	(41)	%	(30)	%
Provision for (benefits from) income taxes			1	%			—	%
Provision for income taxes	1	%			—	%			1	%	—	%
Net loss	(43)	%	~~(40)~~	%	(30)	%	~~(29)~~	%	(42)	%	(30)	%

Three and Six Months Ended ~~April 30~~July 31, 2021 and 2020

Revenue

			Three Months Ended April 30,
	Three Months Ended July 31,															Six Months Ended July 31,
	2021		~~2021~~		2020		~~2020~~		$ Change		~~$ Change~~		% Change		~~% Change~~	2021		2020		$ Change		% Change
	(in thousands, except percentages)		~~(in thousands, except percentages)~~
Subscription	$	117,392	$	~~106,071~~	$	92,831	$	~~88,992~~	$	24,561	$	~~17,079~~	26	%	~~19%~~	$	223,463	$	181,823	$	41,640	23	%
Professional services	26,716		~~25,303~~		22,694		~~23,699~~		4,022		~~1,604~~		18	%	7%	52,019		46,393		5,626		12	%
Total revenue	$	144,108	$	~~131,374~~	$	115,525	$	~~112,691~~	$	28,583	$	~~18,683~~	25	%	~~17%~~	$	275,482	$	228,216	$	47,266	21	%

Total revenue was $~~131~~144.41 million for the three months ended ~~April~~July 3031, 2021 compared to $~~112~~115.75 million for the three months ended ~~April~~July 3031, 2020, which is an increase of $1828.76 million, or 1725%. Total revenue was $275.5 million for the six months ended July 31, 2021 compared to $228.2 million for the six months ended July 31, 2020, which is an increase of $47.3 million or 21%.

Subscription revenue accounted for 81% of total revenue for each of the three and six months ended ~~April~~July 3031, 2021 and 7980% of total revenue for each of the three and six months ended ~~April~~July 3031, 2020, respectively. ~~The~~Subscription ~~increases~~revenue ~~were~~increased ~~primarily driven~~ by ~~revenue~~$24.6 ~~from~~million, ~~new~~or ~~customers~~26%, asfor the ~~number~~three ofmonths ~~enterprise~~ended ~~customers~~July 31, ~~increased~~2021 compared to ~~1,244~~the asthree ofmonths ~~April~~ended July 3031, ~~2021~~2020. ~~from~~Subscription ~~782~~revenue asincreased ofby ~~April 30~~$41.6 million, ~~2020~~or 23%, ~~representing~~for athe ~~59%~~six ~~increase~~months ended July 31, 2021 compared to the six months ended July 31, 2020. We ~~also~~ increased subscription revenue due to cross-selling to our existing customers and expansions as reflected in our dollar-based net revenue retention rate of ~~111~~112% for the ~~three~~six months ended ~~April~~July 3031, 2021.

Professional services revenue increased by $1.6 million, or 7%, for the three months ended April 30, 2021 compared to the three months ended April 30, 2020. The increases were driven by higher managed and implementation services.35

33Professional services revenue increased by $4.0 million, or 18%, for the three months ended July 31, 2021 compared to the three months ended July 31, 2020. Professional services increased by $5.6 million, or 12% for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. The increases were driven by higher managed and implementation services.

Cost of Revenue, Gross Profit and Gross Margin

				Three Months Ended April 30,
	Three Months Ended July 31,																			Six Months Ended July 31,
	2021			~~2021~~			2020			~~2020~~			$ Change		~~$ Change~~		% Change		~~% Change~~	2021			2020			$ Change		% Change
	(in thousands, except percentages)			~~(in thousands, except percentages)~~
Cost of revenue:
Subscription	$	27,592		$	~~24,156~~		$	19,130		$	~~17,344~~		$	8,462	$	~~6,812~~	44	%	~~39%~~	$	51,748		$	36,474		$	15,274	42	%
Professional services	26,931			~~23,542~~			22,042			~~22,219~~			4,889		~~1,323~~		22	%	6%	50,473			44,261			6,212		14	%
Total cost of revenue	$	54,523		$	~~47,698~~		$	41,172		$	~~39,563~~		$	13,351	$	~~8,135~~	32	%	~~21%~~	$	102,221		$	80,735		$	21,486	27	%
Gross profit	$	89,585		$	~~83,676~~		$	74,353		$	~~73,128~~		$	15,232	$	~~10,548~~	20	%	~~14%~~	$	173,261		$	147,481		$	25,780	17	%
Gross margin:
Subscription	76		%	77		%	79		%	81		%								77		%	80		%
Professional services	(1)		%	7		%	3		%	6		%								3		%	5		%
Total gross margin	62		%	64		%	64		%	65		%								63		%	65		%

Total cost of revenue was $4754.75 million for the three months ended ~~April~~July 3031, 2021, ~~compared~~an toincrease of $3913.64 million, ~~for~~or 32% compared to the three months ended ~~April~~July 3031, 2020. Total cost of revenue was $102.2 million for the six months ended July 31, 2021, an increase of $821.15 million, or 2127%. compared to the six months ended July 31, 2020.

Cost of subscription revenue increased by $6.8.5 million, or 3944%, for the three months ended ~~April~~July 3031, 2021 compared to the three months ended ~~April~~July 3031, 2020. The increase was primarily due to ~~higher~~an increase in hosting, software and hardware, including amortization of acquired intangibles, of $56.12 million and higher personnel-related expenses of $2.0 million. Cost of subscription revenue increased by $15.3 million, or 42%, for the six months ended July 31, 2021 compared to ~~infrastructure~~the ~~necessary~~six months ended July 31, 2020. This increase was primarily due to ~~meet~~an ~~our~~$11.4 ~~customer~~million ~~demand~~increase in hosting, software and hardware, including amortization of acquired intangible assets, and a higher personnel-related expenses of $13.53 million.

Cost of professional services revenue increased by $14.39 million, or 622%, for the three months ended ~~April~~July 3031, 2021 compared to the three months ended ~~April~~July 3031, 2020 primarily due to an increase of $23.28 million in personnel-related expenses, ~~partially~~and ~~offset~~an byincrease ~~a decrease~~ of $0.76 million in ~~rent~~outside services and ~~facilities~~other. Cost of professional services revenue increased by $6.2 million, or 14%, for the six months ended July 31, 2021 compared to the six months ended July 31, 2020 primarily due to increases in personnel-related expenses of $5.3 million.

Gross ~~profit~~margin ~~increased~~decreased ~~proportionate~~during to the ~~increase~~three inand ~~revenue~~six ~~for the three~~ months ended ~~April 30~~July 31, 2021 as compared to the three and six months ended ~~April 30~~July 31, 2020. ~~Gross~~due ~~margin~~to ~~did~~higher ~~not~~hosting, ~~materially~~software ~~change~~and ~~during~~hardware, ~~those~~including ~~periods.~~amortization of acquired intangibles.

Research and Development

				Three Months Ended April 30,
	Three Months Ended July 31,																			Six Months Ended July 31,
	2021			~~2021~~			2020			~~2020~~			$ Change		~~$ Change~~		% Change		~~% Change~~	2021			2020			$ Change		% Change
	(in thousands, except percentages)			~~(in thousands, except percentages)~~
Research and development	$	35,363		$	~~30,637~~		$	27,790		$	~~32,379~~		$	7,573	$	~~(1,742)~~	27	%	~~(5)%~~	$	66,000		$	60,169		$	5,831	10	%
Percentage of revenue	25		%	23		%	24		%	29		%								24		%	26		%

Research and development expenses ~~decreased~~increased by $1.7.6 million or 527%, for the three months ended ~~April~~July 3031, 2021 compared to the three months ended ~~April~~July 3031, 2020. The ~~decrease~~increase was primarily due to ~~lower personnel-related expenses of $2.6 million, including stock-based compensation expense of $7.0 million, partially offset by~~ an increase in ~~consulting and other expenses of $1.1 million.~~

personnel-related expenses of $6.3 million and an increase of $1.6 million in outside services and other. Research and development expenses increased by $5.8 million or 10%, for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. The increase was primarily due to higher personnel-related expenses of $3.2 million and an increase of $3.3 million in outside services and other.

Sales and Marketing

				Three Months Ended April 30,
	Three Months Ended July 31,																			Six Months Ended July 31,
	2021			~~2021~~			2020			~~2020~~			$ Change		~~$ Change~~		% Change		~~% Change~~	2021			2020			$ Change		% Change
	(in thousands, except percentages)			~~(in thousands, except percentages)~~
Sales and marketing	$	80,150		$	~~72,980~~		$	51,942		$	~~52,015~~		$	28,208	$	~~20,965~~	54	%	~~40%~~	$	153,130		$	103,957		$	49,173	47	%
Percentage of revenue	56		%	56		%	45		%	46		%								56		%	46		%

34Sales and marketing expenses increased by $28.2 million, or 54%, for the three months ended July 31, 2021 compared to the three months ended July 31, 2020. The increase was primarily due to higher personnel-related expenses of $22.1million as we expanded our quota bearing sales force along with non-quota bearing sales support positions, an increase of $2.2 million in software and outside consulting services and an increase of $2.0 million in marketing costs. Sales and marketing expenses increased by $49.2 million, or 47%, for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. The increase was primarily due to higher personnel-related expenses of $35.1 million, as we continue to expand our quota bearing sales force along with non-quota bearing sales support positions, an increase in marketing costs of $7.5 million from higher advertising and sponsorship expenses, and an increase of $4.1 million in software and other consulting costs.

Sales and marketing expenses increased by $21.0 million, or 40%, for the three months ended April 30, 2021 compared to the three months ended April 30, 2020. The increase was primarily due to higher personnel-related expenses of $15.1 million, as we continue to expand our quota bearing sales force along with non-quota bearing sales support positions, increase in marketing costs of $4.7 million from higher advertising and conference expenses, and increase in software and other consulting costs for $1.3 million.

General and Administrative

				Three Months Ended April 30,
	Three Months Ended July 31,																			Six Months Ended July 31,
	2021			~~2021~~			2020			~~2020~~			$ Change		~~$ Change~~		% Change		~~% Change~~	2021			2020			$ Change		% Change
	(in thousands, except percentages)			~~(in thousands, except percentages)~~
General and administrative	$	33,909		$	~~30,113~~		$	29,137		$	~~21,498~~		$	4,772	$	~~8,615~~	16	%	~~40%~~	$	64,022		$	50,635		$	13,387	26	%
Percentage of revenue	24		%	23		%	25		%	19		%								23		%	22		%

General and administrative expenses increased by $84.68 million, or 4016%, for the three months ended ~~April 30~~July 31, 2021 compared to the three months ended ~~April 30~~July 31, 2020. The increase was primarily due to transaction expenses associated with the ~~increase~~pending inThoma Bravo acquisition ~~related~~of ~~costs~~$9.3 million, partially offset by a decrease in restructuring and other expenses of $24.67 million. General and administrative expenses increased by $13.4 million, or 26%, for the six months ended July 31, 2021 compared to the six months ended July 31, 2020. The increase was primarily due to transaction expenses associated with the pending Thoma Bravo acquisition of $9.3 million, as well as a payment of $5.4 million related to the acceleration of certain stock options in conjunction with the acquisition of Decibel.

~~Other Income (Expense), net and Provision for (benefits from) Income Taxes~~37

	Three Months Ended April 30,
	2021		2020		$ Change		% Change
	(in thousands, except percentages)
Interest expense and other	$	(1,754)	$	(698)	$	(1,056)	151%
Interest income	161		873		(712)		(82)%
Other income (expense), net	$	(1,593)	$	175	$	(1,768)	(1010)%
Provision for (benefits from) income taxes	$	774	$	(60)	$	834	(1,390)%

Other Income (Expense), net and Provision for Income Taxes

Interest expense and other decreased during the three months ended April 30, 2021 compared to the three months ended April 30, 2020 primarily due to an increase in interest expense related to our convertible senior notes and finance leases.


	Three Months Ended July 31,								Six Months Ended July 31,
	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change

	(in thousands, except percentages)
Interest expense and other	$	(1,863)	$	(626)	$	(1,237)	198	%	$	(3,617)	$	(1,324)	$	(2,293)	173	%
Interest income	147		178		(31)		(17)	%	308		1,051		(743)		(71)	%
Other income (expense), net	$	(1,716)	$	(448)	$	(1,268)	283	%	$	(3,309)	$	(273)	$	(3,036)	1112	%

Provision for income taxes	$	937	$	234	$	703	300	%	$	1,711	$	174	$	1,537	883	%

Interest ~~income~~expense ~~decreased~~and other increased during the three and six months ended ~~April~~July 3031, 2021 compared to the three and six months ended ~~April~~July 3031, 2020 primarily due to ~~lower~~an increase in interest ~~rates~~expense onrelated to our ~~cash,~~convertible ~~cash~~senior ~~equivalent~~notes and ~~marketable~~finance ~~securities balances~~leases.

~~Income~~Interest ~~tax~~income ~~expense~~decreased ~~increased by $0.8 million~~ during the three and six months ended ~~April 30~~July 31, 2021 compared to the three and six months ended ~~April 30~~July 31, 2020. ~~This was~~ primarily ~~attributed~~due to ~~higher~~lower ~~foreign~~interest ~~income~~rates ~~taxes~~on our cash, cash equivalent and marketable securities balances.

Income tax expense increased by $0.7 million during the three months ended July 31, 2021 compared to the three months ended July 31, 2020. This was primarily attributed to excess tax benefits from stock-based compensation deductions in the United Kingdom and the tax benefit realized acquisition of Voci during the compartive three months ended July 31, 2020. During the six months ended July 31, 2021, income tax expense increased by $1.5 million compared to the six months ended July 31, 2020, primarily due to excess tax benefits from stock-based compensation deductions in the United Kingdom and the tax benefit realized from the acquisition of Voci during the comparative six months ended July 31, 2020.

Liquidity and Capital Resources

As of ~~April~~July 3031, 2021 and January 31, 2021, we had cash, cash equivalents and current marketable securities of $~~540~~507.56 million and $682.4 million, respectively. On March 12, 2021, we acquired Decibel, a leader in digital experience analytics for approximately $162.3 million in cash, including a payment of $5.4 million related to the acceleration of certain stock options in conjunction with the acquisition of Decibel. We experience seasonality related to our operating cash flows. Our quarterly operating cash flows are generally positive in the first and fourth quarters and are generally negative in the second and third quarters. The seasonality is primarily attributable to higher billings in the fourth quarter of each year. We primarily bill in advance annually for our multi-year contracts, resulting in higher cash collections of trade and other receivables in the first and fourth quarters of each year. This seasonality has not impacted, nor do we expect it to impact in the future, our ability to fund our near-term working capital, finance lease payments or capital expenditure requirements. While we may experience delays in collections which we attribute to the COVID-19 pandemic, we believe that our existing cash, cash equivalents and marketable securities and trade and other receivables will be sufficient to support working capital, finance lease payments and capital expenditure requirements for at least the next 12 months. Our long-term capital expenditure requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and services offerings, and the continuing market acceptance of our products, as well as the timing of the closing of the proposed Merger and the duration and extent of the COVID-19 pandemic and its effect on our business. Since inception, we have financed operations primarily through subscription payments by customers for use of our platform, equity and debt financings, finance lease arrangements and loans for equipment.

35From time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations. In the event that we decide, or are required, to seek additional financing from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to

~~Table of Contents~~38

~~securities~~raise ~~and~~additional ~~trade and other receivables will be sufficient to support working~~ capital, ~~finance~~when ~~lease payments and capital expenditure requirements for at least the next 12 months. Since inception~~desired, ~~we have financed operations primarily through subscription payments by customers for use of~~ our ~~platform~~business, ~~equity~~financial condition and ~~debt~~results ~~financings,~~of ~~finance~~operations ~~lease~~could ~~arrangements~~be ~~and~~adversely ~~loans for equipment~~affected.

~~From~~Merger time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations. In the event that we decide, or are required, to seek additional financing 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, financial condition and results of operations could be adversely affected. Agreement

On July 25, 2021, we entered into the Merger Agreement. We have agreed to various representations, warranties, covenants and agreements, including, among others, agreements to conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger. If the Merger Agreement is terminated in certain circumstances, including by us in order to enter into a superior proposal or by Parent because the Board withdraws its recommendation in favor of the Merger, we would be required to pay Parent a termination fee of up to $191.1 million. In addition, without the consent of Parent, we may not take, authorize, agree or commit to do certain actions outside of the ordinary course of business, including incurring material capital expenditures above specified thresholds, or issuing additional debt facilities. We do not believe that the restrictions in the Merger Agreement will prevent us from meeting our debt obligations, ongoing costs of operations, working capital needs or capital expenditure requirements.

Convertible Senior Notes

In September 2020, we issued $575.0 million aggregate principal amount of convertible senior notes. The net proceeds from this offering were approximately $558.2 million, after deducting the Initial Purchasers’ discounts and commissions and issuance costs.

Capped Call Transactions

In connection with the offering of the Notes, we entered into privately negotiated capped call transactions with respect to our common stock at a cost of approximately $61.9 million. We expect that the capped call transactions will be terminated upon effectiveness of the Merger.

Wells Fargo Bank Credit Facility

On September 4, 2020 we entered into the Wells Fargo Bank Credit Facility (Wells Fargo Credit Facility) to provide for a revolving line of credit of up to $50.0 million with the right (subject to certain conditions) to add incremental revolving commitments of up to $50.0 million in the aggregate. The revolving line of credit provides a sublimit of up to $40.0 million to be available for the issuance of letters of credit. The outstanding balance, if any, is due at the maturity date in September 2023. 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 of LIBOR plus 1.75%. Loans based on the base rate shall bear interest at a rate of the base rate plus 0.75%. We are required to pay a commitment fee equal to 0.25% per annum on the undrawn portion available under the revolving line of credit. As of ~~April~~July 3031, 2021, no amounts were outstanding on this credit facility.

Silicon Valley Bank Credit Facility

On September 4, 2020 we paid all outstanding amounts owing under the Silicon Valley Bank revolving line of credit and terminated the credit facility. We continue to have unsecured letters of credit issued by Silicon Valley Bank in the face amount of $4.7 9 million outstanding as of ~~April~~July 3031, 2021.

Cash Flow Hedging

We conduct business on a global basis in multiple foreign currencies, which subjects us to foreign currency fluctuations resulting from customer contracts and operating expenses denominated in foreign currencies. To protect our margin, we have instituted a cash flow hedging program to help mitigate the variability in cash flows due to certain foreign currency fluctuations. For revenues, we enter into foreign currency forward contracts to sell foreign currencies to hedge the non-U.S. dollar denominated revenue related to year two and year three of our multi-year customer contracts. For expenses, we enter into foreign currency forward contracts to purchase foreign currencies to hedge a percentage of certain non-U.S. dollar denominated operating expenses over the next 12 months.

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~~Table~~customer contracts. For expenses, we enter into foreign currency forward contracts to purchase foreign currencies to hedge a percentage of ~~Contents~~certain non-U.S. dollar denominated operating expenses over the next 12 months.

Cash Flows

The following table shows a summary of our cash flows for the periods presented (in thousands):

	Three Months Ended April 30,
	Six Months Ended July 31,
	2021		2020
Net cash provided by operating activities	$	14,333	$	23,113
Net cash (used in) provided by operating activities	$	(16,791)	$	3,691
Net cash (used in) provided by investing activities	(173,123)		23,692
Net cash used in investing activities	(173,979)		(94,769)
Net cash provided by financing activities	1419,~~023~~371		7190,~~406~~043
Effect of exchange rate changes on cash and cash equivalents	~~378~~122		(~~380~~49)
Net (decrease) increase in cash and cash equivalents	$	(144,389)	$	117,831
Net decrease in cash and cash equivalents	$	(171,277)	$	(1,084)

Operating Activities

Our largest source of operating cash is cash collections from our customers for subscriptions and professional services fees. Our primary uses of cash from operating activities are for personnel-related expenses, facilities costs and rent, marketing expenses and hosting fees. We typically experience relatively higher billings in the fourth quarter compared to other quarters and experience higher collections of trade and other receivables in the first and fourth quarter of the year, which results in a decrease in trade and other receivables.

Cash ~~provided~~used byin operating activities for the ~~three~~six months ended ~~April 30~~July 31, 2021 of $1416.38 million primarily related to our net loss of $52114.49 million, adjusted for non-cash charges of $51104.28 million and net cash ~~inflows~~outflows of $156.6 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment and intangible assets, non-cash lease expenses, ~~the~~ amortization of convertible debt issuance costs and amortization of deferred commissions. The primary drivers of the changes in our operating assets and liabilities related to a $8139.70 million decrease in ~~trade~~deferred ~~and other receivables~~revenue, ~~partially offset by~~ a $3528.71 million ~~decrease~~increase in deferred ~~revenue,~~commissions and a $149.04 million ~~decrease~~increase in ~~accounts~~prepaid ~~payable, accrued~~ expenses, ~~lease liabilities,~~ and other current assets and other noncurrent ~~liabilities~~assets, partially offset by a $958.8 million ~~increase~~decrease in ~~deferred~~trade ~~commissions~~and other receivables, and a $611.61 million increase in ~~prepaid~~accounts payable, accrued expenses, lease liabilities, and other current ~~assets~~ and ~~other~~ noncurrent ~~assets~~liabilities.

Cash provided by operating activities for the ~~three~~six months ended ~~April~~July 3031, 2020 of $233.17 million primarily related to our net loss of $3267.57 million, adjusted for non-cash charges of $4797.04 million and net cash ~~inflows~~outflows of $826.60 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment and intangible assets, ~~non-cash lease expenses~~ and amortization of our deferred commissions. The primary drivers of the changes in our operating assets and liabilities related to a $8163.73 million decrease in accounts receivable, partially offset by a $3957.28 million decrease in deferred revenue, ~~and~~a $2520.20 million increase in deferred commissions, a $10.3 million decrease in accounts payable, accrued expenses, lease liabilities and ~~other~~ non-current ~~and~~ ~~noncurrent~~ liabilities, and a $41.32 million increase in prepaid expense and other assets ~~and other noncurrent assets, and $4~~.~~3 million increase in deferred commissions.~~

Investing Activities

Cash used in investing activities for the ~~three~~six months ended ~~April 30~~July 31, 2021 of $~~173~~174.10 million was due to acquisitions, net of cash acquired of CheckMarket and Decibel for $163.8 million, which includes a payment of $5.4 million related to the acceleration of certain stock options in conjunction with the acquisition of Decibel, the purchases of property, equipment and other of $612.58 million, ~~and~~partially offset by net ~~purchases~~maturities and proceeds from sale of marketable securities of $2.96 million.

Cash ~~provided~~used byin investing activities for the ~~three~~six months ended ~~April~~July 3031, 2020 of $2394.78 million was due to ~~the maturities of marketable securities of $54.3 million, partially offset by the~~ acquisitions, net of cash acquired of LivingLens and Voci for $2580.24 million, ~~and~~ the purchases of property, equipment and other of $59.48 million, and net purchases of marketable securities of $4.6 million.

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Financing Activities

Cash provided by financing activities for the ~~three~~six months ended ~~April 30~~July 31, 2021 of $1419.04 million consisted of $714.68 million in proceeds from the exercise of stock options and $8.0 million in proceeds from the Employee Stock Purchase Plan, partially offset by repayments on finance lease obligations of $13.52 million.

Cash provided by financing activities for the ~~three~~six months ended ~~April~~July 3031, 2020 of $7190.40 million consisted of $43.0 million in proceeds from drawing down our revolving line of credit, $1941.20 million in proceeds from the exercise of stock options and $10.3 million proceeds from the Employee Stock Purchase Plan, partially offset by repayments on ~~finance~~capital lease obligations of $2.1 million and repayments of debt assumed on acquisitions of $2.01 million.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes, except for the letters of credit described in "Note 11 9: ~~Commitments and Contingencies~~Debt" of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting Policies

We prepare our unaudited condensed consolidated financial statements in accordance with GAAP. Preparing our unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as related disclosures. Because these estimates and judgments may change from period to period, actual results could differ materially, which may negatively affect our financial condition or results of operations. We base our estimates and judgments on historical experience and various other assumptions that we consider reasonable, and we evaluate these estimates and judgments on an ongoing basis. There have been no material changes to these policies and estimates for the three and six months ended ~~April 30~~July 31, 2021 from those disclosed in Item 7 of our Form 10-K for the year ended January 31, 2021.

Recent Accounting Pronouncements

See "Note 1: Description of Business and Summary of Significant Accounting Policies" of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recently issued accounting pronouncements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.

Interest Rate Risk

Our exposure to changes in interest rates relates primarily to our investment portfolio. As of ~~April~~July 3031, 2021 we had cash, cash equivalents and marketable securities of $~~540~~507.56 million. Changes in interest rates affect the interest earned on our cash, cash equivalents and investments and the fair value of the investments.

In September 2020, we issued $575.0 million aggregate principal amount of convertible senior notes (Notes). We carry the Notes at par value less the unamortized debt discount and issuance costs on our unaudited condensed consolidated balance sheets. The Notes have a fixed annual interest rate of 0.125% and therefore we do not have economic interest rate exposure. However, the value of the Notes is exposed to interest rate risk. Generally, the fair value of the Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the Notes is affected by our stock price.

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A hypothetical 10% change in interest rates would not result in a material impact on our unaudited condensed consolidated results of operations.

Foreign Currency Exchange Risk

We conduct business on a global basis in multiple currencies, including the U.S. dollar, Euro, British pound, Argentine peso, Canadian dollar and Australian dollar. This subjects us to foreign currency fluctuations resulting from customer contracts and operating expenses denominated in foreign currencies. To protect our margin, we instituted a cash flow hedging program to help mitigate the variability in cash flows due to certain foreign currency fluctuations. For revenues, we enter into foreign currency forward contracts to sell foreign currencies to hedge the non-U.S. dollar denominated revenue related to year two and year three of our multi-year customer contracts. For expenses, we enter into foreign currency forward contracts to purchase foreign currencies to hedge a percentage of certain non-U.S. dollar denominated operating expenses over the next 12 months.

In addition, we initiated a balance sheet hedging program to limit the exposure of foreign currency risk resulting from the revaluation of foreign denominated assets and liabilities through the use of forward exchange contracts. See "Note 5: Derivative Instruments" of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding our hedging program.

We operate in Argentina and the inflation levels in Argentina have been elevated for several years. In the first half of 2018 Argentina's reported inflation rates began to increase dramatically and the Argentine central bank significantly increased interest rates in an effort to combat inflation. Based on Argentina's reported inflation rates and trends, we designated Argentina as a highly inflationary economy for accounting purposes as of the beginning of the third quarter of the fiscal year ended January 31, 2019. The change to highly inflationary accounting did not have a material impact on our unaudited condensed consolidated financial statements for the ~~three~~six months ended ~~April 30~~July 31, 2021.

A hypothetical 10% change in foreign currency exchange rates would ~~not~~ result in a ~~material~~foreign ~~impact~~exchange loss or gain of $0.8 million on our unaudited condensed consolidated results of operations as of July 31, 2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness 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), as of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of ~~April~~July 3031, 2021, the last day of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during the three months ended ~~April~~July 3031, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are 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 and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in

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decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, we are party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows, or financial position. We are not presently party to any legal proceedings that, in the opinion of management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

Item 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes thereto, before making a decision to invest in our common stock. Our business, results of operations, financial condition or prospects could also be harmed by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of the risks actually occur, our business, results of operations, financial condition and prospects could be adversely affected. In that event, the market price of our common stock could decline, and you could lose all or part of your investment.

Summary of Risk Factors

The below is a summary of principal risks to our business and risks associated with ownership of our stock. It is only a summary. You should read the more detailed discussion of risks set forth below and elsewhere in this report for a more complete discussion of the risks listed below and other risks.

•The announcement and pendency of our agreement to be acquired by entities affiliated with Thoma Bravo may have an adverse effect on our business and operating results.

•The extent to which the COVID-19 pandemic, including the resulting global economic uncertainty, and measures taken in response to the pandemic could continue to impact our business and future results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

•We have incurred significant net losses in recent years, we expect to incur losses in the future, and we may not be able to generate sufficient revenue to achieve and maintain profitability.

•We derive, have derived and expect to continue to derive, the substantial majority of our revenue from subscriptions to our platform. Any failure of our platform to satisfy customer demands, achieve increased market acceptance or adapt to changing market dynamics would adversely affect our business, results of operations, financial condition and growth prospects.

•If we fail to effectively manage our growth and organizational change, our business and results of operations could be harmed.

•The market for experience management solutions is new and rapidly evolving, and if this market develops more slowly than we expect, or declines, or develops in a way that we do not expect, our business could be adversely affected.

•The majority of our customer base consists of large and mid-sized enterprises, and we currently generate a significant portion of our revenue from a relatively small number of enterprises, the loss of any of which could harm our business, results of operations and financial condition.

•If we or any of the third parties we work with experience a security breach or other incident or unauthorized parties otherwise obtain access to our customers’ data, our data or our platform, our platform may be perceived as not being secure, our reputation may be harmed, demand for our platform may be reduced and we may incur significant liabilities.

•We rely on our technology infrastructure, including third-party data centers, and any interruption or delay in service from these facilities could impair the delivery of our platform and harm our business.

•Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our platform and adversely affect our business.

•Servicing our current and future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness. Our payment obligations under such 44

41•Servicing our current and future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness. Our payment obligations under such indebtedness may limit the funds available to us, and the terms of our debt agreements may restrict our flexibility in operating our business or otherwise adversely affect our results of operations.

indebtedness may limit the funds available to us, and the terms of our debt agreements may restrict our flexibility in operating our business or otherwise adversely affect our results of operations.

•Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our common stock and the Notes.

Risks Related to Our Business and Our Industry

The ~~extent~~announcement toand ~~which~~pendency ~~the~~of ~~COVID-19~~our ~~pandemic,~~agreement ~~including~~to ~~the~~be ~~resulting~~acquired ~~global~~by ~~economic~~affiliates ~~uncertainty,~~of ~~and~~Thoma ~~measures~~Bravo ~~taken~~may inhave ~~response~~an toadverse ~~the~~effect ~~pandemic~~on ~~could~~our ~~continue~~business toresults ~~impact~~and our ~~business~~failure ~~and~~to ~~future~~complete ~~results~~the ofMerger ~~operations~~could ~~and~~have ~~financial~~a ~~condition~~material ~~will~~adverse ~~depend~~effect on ~~future~~our ~~developments~~business, ~~which~~results ~~are~~of ~~highly~~operations, ~~uncertain~~financial condition and ~~difficult~~stock ~~to predict~~price.

On July 25, 2021, we entered into the Merger Agreement with Parent and Merger Sub. The Merger Agreement provides for our acquisition by affiliates of Thoma Bravo. Completion of the Merger is subject to the satisfaction of certain terms and conditions set forth in the Merger Agreement, including (i) approval of the Merger Agreement by our stockholders; (ii) the absence of any law or order restraining, enjoining or otherwise prohibiting the Merger; and (3) the expiration or termination of the waiting period under the United States Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and clearance under the antitrust laws of certain non-United States jurisdictions. There is no assurance that all of the various conditions will be satisfied, or that the Merger will be completed on the proposed terms, within the expected timeframe, or at all.

The Merger may be delayed, and may ultimately not be completed, due to a number of factors, including:

•the failure to obtain requisite stockholder approval to approve the Merger;

•the failure to obtain regulatory approvals from various governmental entities;

•potential future stockholder litigation and other legal and regulatory proceedings, which could delay or prevent the Merger; and

•the failure to satisfy the other conditions to the completion of the Merger, including the possibility that a Company Material Adverse Effect (as defined in the Merger Agreement) would permit Parent not to close the Merger.

If the Merger does not close, we may suffer other consequences that could adversely affect our business, financial condition, operating results, and stock price, and our stockholders would be exposed to additional risks, including:

•to the extent that the current market price of our stock reflects an assumption that the Merger will be completed, the price of our common stock could decrease if the Merger is not completed;

•investor confidence in us could decline, stockholder litigation could be brought against us, relationships with existing and prospective customers, service providers, investors, lenders and other business partners may be adversely impacted, we may be unable to retain key personnel, and our operating results may be adversely impacted due to costs incurred in connection with the Merger;

•any disruptions to our business resulting from the announcement and pendency of the Merger, including adverse changes in our relationships with customers, suppliers, partners and employees, may continue or intensify in the event the Merger is not consummated or is significantly delayed; and

•the requirement that we pay the Parent a termination fee under certain circumstances that give rise to the termination of the Merger Agreement.

There can be no assurance that our business, relationships with other parties, liquidity or financial condition will not be adversely affected, as compared to the condition prior to the announcement of the Merger, if the Merger is not consummated. Even if successfully completed, there are certain risks to our stockholders from the Merger, including:

•we may experience a departure of employees, prior to the closing of the Merger;

•the amount of cash to be paid under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating

results or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock;

•receipt of the all-cash per share merger consideration under the Merger Agreement is taxable to stockholders that are treated as U.S. holders for U.S. federal income tax purposes; and

•if the Merger is completed, our stockholders will forego the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent company.

While the Merger is pending, we are subject to business uncertainties and contractual restrictions that could harm our business relationships, financial condition, operating results, and business.

During the period prior to the closing of the Merger and pursuant to the terms of the Merger Agreement, our business is exposed to certain inherent risks and contractual restrictions that could harm our business relationships, financial condition, operating results, and business, including:

•potential uncertainty in the marketplace, which could lead current and prospective customers to purchase products and services from other providers or delay purchasing from us;

•difficulties maintaining existing and/or establishing business relationships, including business relationships with significant customers, suppliers and partners;

•the possibility of disruption to our business and operations resulting from the announcement and pendency of the Merger, including diversion of management attention and resources;

•the inability to attract and retain key personnel and recruit prospective employees, and the possibility that our current employees could be distracted, and their productivity decline as a result, due to uncertainty regarding the Merger;

•the inability to pursue alternative business opportunities or make changes to our business pending the completion of the Merger, and other restrictions on our ability to conduct our business;

•our inability to freely issue securities, incur Indebtedness (as defined in the Merger Agreement), declare or authorize any dividend or distribution, or make certain material capital expenditures without Parent's approval;

•our inability to solicit other acquisition proposals during the pendency of the Merger following the expiration of the “go-shop” period;

•the amount of the costs, fees, expenses and charges related to the Merger Agreement and the Merger, which may materially and adversely affect our financial condition; and

•other developments beyond our control, including, but not limited to, changes in domestic or global economic conditions that may affect the timing or success of the Merger.

If any of these effects were to occur, it could materially and adversely impact our business, cash flow, results of operations or financial condition, as well as the market price of our common stock and our perceived value, regardless of whether the Merger is completed.

Litigation may arise in connection with the Merger, which could be costly, prevent consummation of the Merger, divert management’s attention and otherwise materially harm our business.

Regardless of the outcome of any future litigation related to the Merger, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and counterclaims in any litigation related to the Merger may materially adversely affect our business, results of operations, prospects, and financial condition. If the Merger is not consummated for any reason, litigation could be filed in connection with the failure to consummate the Merger. Any litigation related to the Merger may result in negative publicity or an unfavorable impression of us, which could adversely affect the price of our common stock, impair our ability to recruit or retain employees, damage our relationships with our customers, suppliers, and other business partners, or otherwise materially harm our operations and financial performance.

The extent to which the COVID-19 pandemic, including the resulting global economic uncertainty, and measures taken in response to the pandemic could continue to impact our business and future results of

operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

The COVID-19 pandemic has disrupted the flow of the economy and put unprecedented strains on governments, health care systems, educational institutions, businesses and individuals around the world. The impact on the global population and the continued duration of the COVID-19 pandemic is difficult to assess or predict. It is even more difficult to predict the impact on the global economic market, which will be highly dependent upon the actions of governments, businesses and other organizations in response to the pandemic and the effectiveness of those actions. The pandemic has already caused, and is likely to result in further, significant disruption of global financial markets and economic uncertainty. A recession or other sustained adverse market events resulting from the spread of COVID-19 could adversely affect our business and the value of our common stock.

Our customers or potential customers, particularly in industries most impacted by the COVID-19 pandemic such as hospitality, transportation, retail, manufacturing, and insurance, have reduced or delayed their spending on customer experience, which could adversely impact our business. Certain of our customers have requested lengthened payment terms during the year ended January 31, 2021. We have experienced and may continue to experience curtailed customer demand for our platform, reduced customer spending or contract duration, delayed collections, increased allowances for doubtful accounts, lengthened payment terms and increased competition due to changes in terms, that could adversely affect our business, results of operations and overall financial performance in future periods.

In response to the COVID-19 pandemic, we have temporarily closed our offices (including our headquarters), required our employees to work remotely, implemented travel restrictions for all non-essential business, and shifted certain of our customer, industry, analyst, investor, and employee events, including our Medallia Experience 2020 and 2021 conferences, to virtual-only, and we may similarly alter, postpone or cancel events in the future. If the COVID-19 pandemic worsens, especially in regions in which we have material operations or sales, our business activities originating from affected areas, including sales-related activities, could be adversely affected. Disruptive activities could include business closures in impacted areas, further restrictions on our employees’ and other service providers’ ability to travel, impacts to productivity if our employees or their family members experience health issues and potential delays in the hiring and onboarding of new employees. Further, we may experience increased cyberattacks and security challenges as our employee base works remotely.

The extent and continued impact of the COVID-19 pandemic on our business will depend on certain developments including: the duration and continued spread of the outbreak; government responses to the pandemic; resurgence of COVID-19 infections in different geographies; efficacy of the currently available COVID-19 vaccines against current and future variants of the virus; how quickly and to what extent normal economic and operating activities can resume, including the speed of rollout of COVID-19 vaccines, lifting of restrictions on movement, and normalization of full-time return to work and social events; impact on our customers and our sales cycles; impact on our customer, industry or employee events; and effect on our partners and vendors, all of which are uncertain and cannot be predicted. The effect of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial performance until future periods.

We have incurred significant net losses in recent years, we expect to incur losses in the future, and we may not be able to generate sufficient revenue to achieve and maintain profitability.

We have incurred significant net losses in recent periods, including net losses of approximately $52114.49 million and $3267.~~5 million and $148.~~7 million ~~and $112.3 million~~ for the ~~three~~six months ended ~~April~~July 3031, 2021 and 2020, and $148.7 million and $112.3 million fiscal years ended January 31, 2021 and 2020, respectively. We had an accumulated deficit of approximately $~~674~~737.83 million as of ~~April~~July 3031, 2021. We expect our costs will increase over time and our losses to continue as we expect to invest significant additional funds towards growing our business, ~~and~~ operating as a public company and transitioning back to a private company. To date, we have financed our operations principally through subscription payments by customers for use of our platform, equity and debt financings, finance lease arrangements and loans for equipment. We have expended and expect to continue to expend substantial financial and other resources on:

•developing our Experience Management platform, including investing in our research and development team, developing or acquiring new products, features and functionality and improving the scalability, availability and security of our platform;

•our technology infrastructure, including expansion of our activities in third-party data centers in which we lease space and where we manage our own hosting and network equipment, enhancements to our network operations and infrastructure and hiring of additional employees for our operations team;

•sales and marketing, including expansion of our direct sales organization and marketing efforts; and

•additional international expansion in an effort to increase our customer base and sales.

These investments may be more costly than we expect and may not result in increased revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving and maintaining profitability or positive cash flow on a consistent basis. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. In the event that we fail to achieve or maintain profitability, this could negatively impact the value of our common stock.

We derive, have derived and expect to continue to derive, the substantial majority of our revenue from subscriptions to our platform. Any failure of our platform to satisfy customer demands, achieve increased market acceptance or adapt to changing market dynamics would adversely affect our business, results of operations, financial condition and growth prospects.

We derive, have derived, and expect to continue to derive the substantial majority of our revenue from subscriptions to our platform. As such, the market acceptance of our platform is critical to our success. Demand for our platform is affected by a number of factors, many of which are beyond our control, including the extension of our platform for new use cases, the timing of development and release of new products, features and functionality introduced by us or our competitors, technological change and the growth or contraction of the market in which we compete.

The COVID-19 pandemic has created significant additional uncertainty in the global economy. The COVID-19 pandemic and health measures taken by governments and private industry in response to the COVID-19 pandemic, including stay-at-home orders and travel restrictions, have had a significant effect on the economy. Continued uncertainty about the pandemic, associated economic consequences and potential relief measures may have a long-term adverse effect on the economy, our customers, the demand for our platform and our business.

In addition, we expect that an increasing focus on customer satisfaction and the growth of various communications channels and new technologies will profoundly impact the market for experience management solutions. We believe that enterprises are increasingly looking for flexible solutions that bridge across traditionally separate systems for experience management, marketing automation and customer relationship management. If we are unable to meet this demand to manage customer experiences through flexible solutions designed to address a broad range of needs, or if we otherwise fail to achieve more widespread market acceptance of our platform, our business, results of operations, financial condition and growth prospects may be adversely affected.

If we fail to effectively manage our growth and organizational change, our business and results of operations could be harmed.

We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management, operational and financial resources. In addition, we operate globally, sell subscriptions in more than 80 countries and have established subsidiaries in Argentina, Australia, Brazil, Belgium, Canada, Chile, Colombia, the Czech Republic, France, Germany, India, Ireland, Israel, Italy, Japan, Mexico, the Netherlands, New Zealand, Norway, Singapore, Spain, the United Kingdom, and the United States. We plan to continue to expand our international operations into other countries in the future, which will place additional demands on our resources and operations. We have also experienced significant growth in the number of enterprises, end users, transactions, and amount of data that our platform and our associated hosting infrastructure support. For example, our number of enterprise customers has grown to 1,~~244~~340 as of ~~April~~July 3031, 2021 from ~~782~~839 as of ~~April~~July 3031, 2020, an increase of 5960%. Using the methodology of counting as a single enterprise ~~customer all subsidiaries and divisions of a single parent, we had 904 as of April 30, 2021 from 528 as of April 30, 2020 parent enterprise customers, an increase of 71%.~~

customer all subsidiaries and divisions of a single parent, we had 984 as of July 31, 2021 from 590 as of July 31, 2020 parent enterprise customers, an increase of 67%.

Further, in order to successfully manage our growth, our organizational structure has become, and may continue to become, more complex. In addition, we may need to scale and adapt our operational, financial and management controls further, as well as our reporting systems and procedures to manage this complexity and our increased responsibilities as a public company. This will require us to invest in and commit significant financial, operational and management resources to grow and change in these areas without undermining the corporate culture that has been critical to our growth so far. These investments will require significant expenditures, and any investments we make will occur in advance of the benefits from such investments, making it difficult to determine in a timely manner if we are efficiently allocating our resources. If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, or if we are unable to achieve a high level of efficiency as our organization grows, in a manner that preserves the key aspects of our culture, our business, results of operations and financial condition may be adversely affected.

The market for experience management solutions is new and rapidly evolving, and if this market develops more slowly than we expect or declines, or develops in a way that we do not expect, our business could be adversely affected.

Because we generate, and expect to continue to generate, a large majority of our revenue from the sale of subscriptions to our platform, we believe our success and growth will depend to a substantial extent on the widespread acceptance and adoption of experience management solutions in general, and of our platform in particular. The market for experience management solutions is new and rapidly evolving, and if this market fails to grow or grows more slowly than we currently anticipate, demand for our platform could be adversely affected. The experience management market is also subject to rapidly changing user demand and trends and as a result it is difficult to predict enterprise adoption rates and demand for our platform, the future growth rate and size of our market or the impact of competitive solutions.

The expansion of the experience management market depends on a number of factors, including awareness of the experience management category generally, ease of adoption and use, cost, features, performance and overall platform experience, data security and privacy, interoperability and accessibility across devices, systems and platforms and perceived value. If experience management solutions do not continue to achieve market acceptance, or there is a reduction in demand for experience management solutions for any reason, including a lack of category or use case awareness, technological challenges, weakening economic conditions, including as a result of the COVID-19 pandemic, data security or privacy concerns, competing technologies and products or decreases in information technology spending, our business, results of operations and financial condition would be adversely affected. Some of our customers and potential customers are in industries most impacted by the COVID-19 pandemic, such as hospitality, transportation, retail, and insurance, which could adversely affect our business.

If we are unable to attract new customers in a manner that is cost-effective and assures customer success, then our business, results of operations and financial condition would be adversely affected.

In order to grow our business, we must continue to attract new customers in a cost-effective manner and enable such enterprises to realize the benefits associated with our platform. We may not be able to attract new enterprises to our platform for a variety of reasons, including as a result of their use of traditional approaches to experience management, their internal timing or budget or the pricing of our platform compared to products and services offered by our competitors. After a customer makes a purchasing decision, we often must also help them successfully implement our platform in their organization, a process that can last several months.

Even if we do attract enterprises, the cost of new customer acquisition or ongoing customer support may prove so high as to prevent us from achieving or sustaining profitability. We intend to continue to hire additional sales personnel on a global basis, increase our marketing activities to help educate the market about the benefits of our platform, grow our domestic and international operations and build brand awareness. If the costs of these sales and marketing efforts increase dramatically or if they do not result in the cost-effective acquisition of additional ~~customers or substantial increases in revenue, our business, results of operations and financial condition may be adversely affected.~~

customers or substantial increases in revenue, our business, results of operations and financial condition may be adversely affected.

Our business depends on our customers renewing their subscriptions and expanding their use of our platform. Any decline in our customer renewals or expansion would harm our business, results of operations and financial condition.

In order for us to maintain or improve our results of operations, it is important that we maintain and expand our relationships with our customers and that our customers renew their subscriptions when the initial or renewal subscription term expires or otherwise expand their subscription program with us. Our customers are not obligated to, and may elect not to, renew their subscriptions on the same or similar terms after their existing subscriptions expire. Some of our customers have in the past elected, and may in the future elect, not to renew their agreements with us or otherwise reduce the scope of their subscriptions, and we do not have sufficient operating history with our business model and pricing strategy to accurately predict long-term customer renewal rates. In addition, the growth of our business depends in part on our customers expanding their use of our platform, which can be difficult to predict.

Our customer renewal rates, as well as the rate at which our customers expand their use of our platform, may decline or fluctuate as a result of a number of factors, including the customers’ satisfaction with our platform, defects or performance issues, our customer and product support, our prices, mergers and acquisitions affecting us or our customer base, the effects of global economic conditions, including weakened economic conditions as a result of the COVID-19 pandemic, the entrance of new or competing technologies and the pricing of such competitive offerings or reductions in the enterprises’ spending levels for any reason. If our customers do not renew their subscriptions, renew on less favorable terms or reduce the scope of their subscriptions, our revenue may decline and we may not realize improved results of operations from our customer base, and as a result, our business and financial condition could be adversely affected.

The market in which we participate is new and rapidly evolving, and if we do not compete effectively, our results of operations and financial condition could be harmed.

The market for experience management solutions is fragmented, rapidly evolving and highly competitive. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or enterprise requirements. With the introduction of new technologies, the evolution of our platform and new market entrants, we expect competition to intensify in the future. Pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses or the failure of our platform to achieve or maintain more widespread market acceptance, any of which could harm our business.

Our competitors vary in size and in the breadth and scope of the products and services they offer. While we do not believe that any of our competitors currently offer a full suite of experience management solutions that competes across the breadth of our platform, certain features of our platform compete in particular segments of the overall experience management category. For example, we compete with a number of SaaS providers of survey tools, including Qualtrics and SurveyMonkey, many of which offer significantly lower prices for their products or services. We also compete with contact center technology companies, such as CloudCherry (acquired by Cisco Systems Inc.), Nice Ltd. and Verint Systems Inc., which may have longer operating histories, have invested heavily in experience management and may aggressively expand their products and services in the near future. Additionally, we face competition from full-service consulting firms such as Maritz CX (acquired by InMoment) and Willis Towers Watson, which bundle additional market research services with competing products and services. Further, other established SaaS providers and other technology companies not currently focused on experience management may expand their services to compete with us.

tools, including Qualtrics and SurveyMonkey, many of which offer significantly lower prices for their products or services. We also compete with contact center technology companies, such as CloudCherry (acquired by Cisco Systems Inc.), Nice Ltd. and Verint Systems Inc., which may have longer operating histories, have invested heavily in experience management and may aggressively expand their products and services in the near future. Additionally, we face competition from full-service consulting firms such as Maritz CX (acquired by InMoment) and Willis Towers Watson, which bundle additional market research services with competing products and services. Further, other established SaaS providers and other technology companies not currently focused on experience management may expand their services to compete with us.

Many of our current and potential competitors benefit from competitive advantages over us, including:

•greater name and brand recognition;

•longer operating histories;

•deeper product development expertise;

•greater market penetration;

•larger and more established customer bases and relationships;

•larger sales forces and more established networks;

•larger marketing budgets; and

•access to significantly greater financial, human, technical and other resources.

Some of our competitors may be able to offer products or functionality similar to ours at a more attractive price than we can, including by integrating or bundling such products with their other product offerings. Additionally, some potential customers, particularly large organizations, have elected, and may in the future elect, to develop their own internal experience management solutions. Acquisitions, partnerships and consolidation in our industry may provide our competitors even more resources or may increase the likelihood of our competitors offering bundled or integrated products that we may not be able to effectively compete against. In particular, as we rely on the availability and accuracy of various forms of customer feedback and input data, the acquisition of any such data providers or sources by our competitors could affect our ability to continue accessing such data. Furthermore, we are also subject to the risk of future disruptive technologies. If new technologies emerge that are able to collect and process experience data, or otherwise develop experience management solutions at lower prices, more efficiently, more conveniently or with functionality and features enterprises prefer to ours, such technologies could adversely impact our ability to compete. If we are not able to compete successfully against our current and future competitors, our business, results of operations and financial condition may be adversely affected.

If we are not able to effectively develop platform enhancements, introduce new products or keep pace with technological developments, our business, results of operations and financial condition could be adversely affected.

Our future success, in part, will depend on our ability to adapt and innovate. To attract new customers and increase revenue from our existing customers, we will need to enhance and improve our existing platform and introduce new products, features and functionality. Enhancements and new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects and may have interoperability difficulties with our platform or other products. We have in the past experienced delays in our internally planned release dates of new products, features and functionality, and there can be no assurance that these developments will be released according to schedule. We have also invested, and may continue to invest, in the acquisition of complementary businesses and technologies that we believe will enhance our platform. For example, during the fiscal year ended January 31, 2021 we completed acquisitions of (i) LivingLens, a video feedback platform provider; (ii) Voci, a real-time speech to text platform, that delivers a rich single view of the customer that can power an exceptional customer experience; (iii) Stella Connect, a customer feedback and quality management platform that helps customer support teams analyze and improve performance in real time; and (iv) Sense360, a consumer insights platform that provides always-on, consumer and competitive intelligence from buyer and non-buyer segments and answers pressing questions such as what is driving traffic, what are the growth opportunities in a specific market and which competitors are gaining share and why. In addition, during the three months ended April 30, 2021, we completed the acquisition of Decibel, aand ~~leader in digital experience analytics~~CheckMarket.

However, if we are unable to integrate these acquisitions successfully or achieve the expected benefits of such acquisitions in a timely and effective manner, then our business, results of operations and financial condition could be adversely affected.

In addition, because our platform is designed to operate on a variety of networks, applications, systems and devices, we will need to continually modify and enhance our platform to keep pace with technological advancements in such networks, applications, systems and devices. If we are unable to respond in a timely, user-friendly and cost-effective manner to these rapid technological developments, our platform may become less marketable and less competitive or obsolete, and our business, results of operations and financial condition may be adversely affected.

Any failure by us or our partners to offer high-quality customer service and support may adversely affect our relationships with our existing and prospective customers, and in turn adversely affect our business reputation, results of operations and financial condition.

In implementing and using our platform, our customers depend on our customer service and support, including premium support offerings, which in some cases may be provided by third-party partners, to resolve complex technical and operational issues in a timely manner. We, or our partners, may be unable to respond quickly enough to accommodate short-term increases in demand for customer or product support. We also may be unable to modify the nature, scope and delivery of our professional services or customer and product support to compete with changes in solutions provided by our competitors. Increased customer demand for support, without corresponding revenue, could increase costs and adversely affect our results of operations and financial condition. Our sales are highly dependent on our reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality customer or product support, or a market perception that we do not maintain high-quality customer or product support, could adversely affect our reputation, our ability to sell our platform, and in turn our business, results of operations, and financial condition.

The majority of our customer base consists of large and mid-sized enterprises, and we currently generate a significant portion of our revenue from a relatively small number of enterprises, the loss of any of which could harm our business, results of operations and financial condition.

In the ~~three~~six months ended ~~April~~July 3031, 2021 and 2020 and for the fiscal years ended January 31, 2021 and 2020 our top 10 customers accounted for 21%, 25%, 24% and 25% of our revenue, respectively. The majority of our customer base consists of large and mid-sized enterprises, many of which have high subscription amounts to our platform. For all periods presented, we have relied on sales of our platform to large enterprises for a significant majority of our revenue. Additionally, some of our customers and potential customers are in industries most impacted by the COVID-19 pandemic, such as hospitality, transportation, and retail. Accordingly, the loss of any one of our large customers, including because of the COVID-19 pandemic, could have a relatively higher impact on our business and results of operations than the loss of a client in businesses that have a broader client base where each client contributes to a smaller portion of revenue. While we expect that the revenue from our largest customers will decrease over time as a percentage of our total revenue as we generate more revenue from other customers, we also believe that revenue from our largest customers may continue to account for a significant portion of our revenue, at least in the near term. In the event that these large customers discontinue the use of our platform or use our platform in a more limited capacity, our business, results of operations and financial condition could be adversely affected.

If we or any of the third parties we work with experience a security breach or other incident or unauthorized parties otherwise obtain access to our customers’ data, our data or our platform, our platform may be perceived as not being secure, our reputation may be harmed, demand for our platform may be reduced and we may incur significant liabilities.

Use of our platform involves storing, transmitting and processing our customers’ proprietary data, including personal data regarding their customers or employees. We may become the target of cyber-attacks by third parties seeking unauthorized access to our data or our customers’ data or to disrupt our ability to provide our platform. While we have taken steps to protect the confidential information that we have access to, including confidential information we may obtain through our customer support services or enterprise usage of our platform, our security measures or those of our third-party service providers could be breached or we could suffer data loss or unauthorized access to our platform or the systems or networks used in our business.

measures or those of our third-party service providers could be breached or we could suffer data loss or unauthorized access to our platform or the systems or networks used in our business.

We also process, store and transmit our own data as part of our business and operations. This data may include personally identifiable, confidential or proprietary information. There can be no assurance that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats. While we utilize certain measures in an effort to protect the security of our platform and the availability, integrity, confidentiality and security of our data, our security measures or those of our third-party service providers could fail and result in unauthorized access to or use of our platform or unauthorized, accidental or unlawful access to, or disclosure, modification, misuse, loss or destruction of, our or our customers’ data.

In addition, computer malware, viruses and computer hacking, fraudulent use, social engineering (predominantly phishing attacks) and general hacking have become more prevalent, and such incidents or incident attempts have occurred on our platform in the past and may occur on our platform in the future. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of our platform to the satisfaction of our customers may harm our reputation and our ability to retain existing customers and attract new customers. A substantial portion of our business is with large enterprises, which often have heightened sensitivity to data security and privacy issues, and any actual or perceived security breach or other incident may have an especially large impact on the attractiveness of our platform to our customer base. Further, we may experience increased cyberattacks and security challenges as our employee base works remotely due to the COVID-19 pandemic.

Because there are many different security breach techniques and such techniques continue to evolve, we may be unable to anticipate attempted security breaches or implement adequate preventative measures. We may also experience security breaches or other incidents that may remain undetected for an extended period of time. Further, third parties may also conduct attacks designed to disrupt or deny access to our platform. Additionally, other third parties we work with may experience security breaches or other incidents that affect our platform or our data or our customers’ data. Actual or perceived security breaches or other security incidents could result in unauthorized use of or access to our platform, unauthorized, accidental or unlawful access to, or disclosure, modification, misuse, loss or destruction of, our or our customers’ data, litigation, indemnity obligations, regulatory investigations and other proceedings, severe reputational damage adversely affecting client or investor confidence and causing damage to our brand, disruption to our operations, damages for contract breach and other liabilities and may adversely affect our business, results of operations and financial condition.

Any actual or perceived security breach or other incident may lead to the expenditure of significant financial and other resources in efforts to investigate or correct a breach, address and eliminate vulnerabilities and prevent future security breaches or incidents, as well as the incurring of significant expenses for remediation that may include liability for stolen assets or information, repair of system damage that may have been caused, incentives offered to our customers or business partners in an effort to maintain business relationships after a breach and other liabilities. We have incurred and expect to incur significant expenses in an effort to prevent security breaches and other incidents, including deploying additional personnel and protection technologies, training personnel and engaging third-party experts and consultants.

We cannot be certain that our insurance coverage will be adequate for data security liabilities actually incurred or cover any indemnification claims against us relating to any security incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our business, reputation, results of operations and financial condition.

Furthermore, because data security is a critical competitive factor in our industry, we make numerous statements in our privacy policies and terms of service, through our certifications to certain industry standards and in our marketing materials providing assurances about the security of our platform, including detailed descriptions of security measures we employ. Should any of these statements be untrue or become untrue, even through circumstances beyond our reasonable control, we may face claims, investigations or other proceedings by the U.S. Federal Trade Commission, state and foreign regulators and private litigants.

circumstances beyond our reasonable control, we may face claims, investigations or other proceedings by the U.S. Federal Trade Commission, state and foreign regulators and private litigants.

Interruptions or suboptimal performance associated with our technology and infrastructure may adversely affect our business, results of operations and financial condition.

Our continued growth, brand, reputation and ability to attract and retain customers depend in part on the ability of our customers to access our platform at any time and within an acceptable amount of time. Our platform is proprietary, and we are dependent on the expertise and efforts of members of our engineering, operations and software development teams for their continued performance. We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing our platform concurrently and denial of service attacks or other security-related incidents. In some instances, we may not be able to rectify or even identify the cause or causes of these performance issues within an acceptable period of time. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as our platform becomes more complex and our user traffic increases. If our platform is unavailable or if users are unable to access our platform within a reasonable amount of time, or at all, our business, results of operations and financial condition would be adversely affected. Moreover, some of our customer agreements include performance guarantees and service-level standards that obligate us to provide credits or termination rights in the event of a significant disruption in the functioning of our platform.

overwhelming number of users accessing our platform concurrently and denial of service attacks or other security-related incidents. In some instances, we may not be able to rectify or even identify the cause or causes of these performance issues within an acceptable period of time. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as our platform becomes more complex and our user traffic increases. If our platform is unavailable or if users are unable to access our platform within a reasonable amount of time, or at all, our business, results of operations and financial condition would be adversely affected. Moreover, some of our customer agreements include performance guarantees and service-level standards that obligate us to provide credits or termination rights in the event of a significant disruption in the functioning of our platform.

To the extent that we do not effectively address capacity constraints, upgrade our systems and data centers as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology or an increased user base, we may experience service interruptions and performance issues, and our business, results of operations and financial condition may be adversely affected.

Our business and growth depend in part on the success of our strategic relationships with third parties, as well as on the continued availability and quality of feedback data from third parties over whom we do not have control.

We depend on, and anticipate that we will continue to depend on, various third-party relationships in order to sustain and grow our business, including technology companies whose products integrate with ours. Failure of any of these technology companies to maintain, support or secure their technology platforms in general, and our integrations in particular, or errors or defects in their technologies or products, could adversely affect our relationships with our customers, damage our brand and reputation and result in delays or difficulties in our ability to provide our platform. We also rely on the availability and accuracy of various forms of client feedback and input data, including data solicited via survey or based on social media data sources, and any changes in the availability or accuracy of such data could adversely impact our business and results of operations and harm our reputation and brand.

Identifying, negotiating and documenting relationships with strategic third parties such as systems integrators, implementation, software and technology and consulting partners, servicing subcontractors and data providers requires significant time and resources. Furthermore, integrating third-party technology is complex, costly and time-consuming and increases the risk of defects or errors on our platform and our platform’s functionality. Our agreements with technology partners, implementation providers, servicing subcontractors and data providers are typically limited in duration, non-exclusive and do not prohibit our partners from working with our competitors or from offering competing services. Our competitors may be effective in providing incentives to third parties to favor their solutions or to prevent or reduce subscriptions to our platform.

We rely on our ecosystem of partners to support our cost structure. If we are unsuccessful in establishing or maintaining our relationships with these strategic third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations would suffer. Even if we are successful in establishing and maintaining these relationships, we cannot assure you that they will result in improved results of operations.

We rely on our technology infrastructure, including third-party data centers, and any interruption or delay in service from these facilities could impair the delivery of our platform and harm our business.

We currently serve our customers from a combination of our own custom-built infrastructure that we lease and operate in co-location facilities, hosted by several different providers, and third-party data centers located primarily in the United States and Europe. Some of these facilities may be located in areas prone to natural disasters and may experience events such as earthquakes, floods, fires, power loss, telecommunication failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. As we grow and continue to add new co-location facilities and third-party data centers and expand the capacity of our existing co-location facilities and third-party data centers, we may move or transfer our data and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our platform. Any damage to, or failure of, our systems, or those of our third-party data centers, could result in interruptions on our platform or damage to, or loss or compromise of, our data and our customers’ data. Any impairment of our or our customers’ data or interruptions in the functioning of our platform, whether due to damage to, or failure of, our co-location facilities and third-party data centers or unsuccessful data transfers, may reduce our revenue, cause us to issue credits or pay penalties, subject us to claims for indemnification and litigation, cause our customers to terminate their subscriptions and adversely affect our reputation, renewal rates and our ability to attract new customers. Our business will also be harmed if our existing and potential customers believe our platform is unreliable.

Any impairment of our or our customers’ data or interruptions in the functioning of our platform, whether due to damage to, or failure of, our co-location facilities and third-party data centers or unsuccessful data transfers, may reduce our revenue, cause us to issue credits or pay penalties, subject us to claims for indemnification and litigation, cause our customers to terminate their subscriptions and adversely affect our reputation, renewal rates and our ability to attract new customers. Our business will also be harmed if our existing and potential customers believe our platform is unreliable.

Further, our leases and other agreements with data center providers expire at various times, and the owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If services are interrupted at any of these facilities, or we are unable to renew these agreements on commercially reasonable terms, or if one of our data center providers is acquired or encounters financial difficulties, including bankruptcy, we may be required to transfer our servers and other infrastructure to new data centers, and we may incur significant costs and possible service interruptions in connection with doing so. In addition, if we do not accurately plan for our data center capacity requirements, and we experience significant strains on our data center capacity, we may experience delays and additional expenses in arranging new data center arrangements, and our customers could experience service outages that may subject us to financial liabilities, result in customer losses and harm our business.

We depend and rely upon SaaS technologies from third parties to operate our business, and interruptions or performance problems with these technologies may adversely affect our business and results of operations.

We rely heavily on hosted SaaS applications from third parties in order to operate critical functions of our business, including billing and order management, financial accounting services, enterprise resource planning, customer relationship management, human resources management and customer support. If these services become unavailable or lose certain functionalities that we depend on, due to extended outages, interruptions, errors or defects, acquisitions or integration into other solutions or because they are no longer available on commercially reasonable terms, our expenses could increase, our ability to manage finances could be interrupted and our processes for managing sales of our platform and supporting our customers could be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could adversely affect our business.

Real or perceived defects or errors on our platform could harm our reputation, result in significant costs to us, and impair our ability to sell subscriptions to our platform and related services.

The software underlying our platform is complex and may contain material defects or errors, particularly when first introduced or when new features or capabilities are released. In addition, our solution depends on the ability of our software to store, retrieve, process and manage immense amounts of data. Any real or perceived defects, errors, failures, bugs or vulnerabilities on our platform could result in negative publicity, data security, access, retention or other performance issues and customer terminations and impair our ability to sell subscriptions to our platform and related services in the future. The costs incurred in correcting any defects in our platform may be substantial and could adversely affect our results of operations. Although we continually test our platform for defects and work with customers through our customer support organization to identify and correct errors, we have from time to time found defects or errors on our platform, and defects or errors on our platform are likely to occur again in the future. Any defects that cause interruptions to the availability of our platform or other performance issues could result in, among other things:

again in the future. Any defects that cause interruptions to the availability of our platform or other performance issues could result in, among other things:

•lost revenue or delayed market acceptance and sales of our platform;

•early termination of customer agreements or loss of customers;

•credits or refunds to customers;

•product liability lawsuits and other claims against us;

•diversion of development resources;

•increased expenses associated with remedying any defect, including increased technical support costs;

•injury to our brand and reputation; and

•increased maintenance and warranty costs.

While our customer agreements typically contain limitations and disclaimers that purport to limit our liability for damages related to defects in our solution, such limitations and disclaimers may not be enforced by a court or other tribunal or otherwise effectively protect us from such claims.

We depend on our management team and key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect our business.

Our success depends substantially on the continued services of our management team and key employees, who are critical to our vision, strategic direction, culture, services and technology. From time to time, there may be additional changes in our management team resulting from the hiring or departure of executives, which could disrupt our business. New hires also require significant training and, in most cases, take significant time before they achieve full productivity. Furthermore, we do not have employment agreements with members of our management team or other key employees that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of our executives or key employees, or the failure by our executives to effectively work with our employees and lead our company, could have an adverse effect on our business.

In addition, to execute our growth plan, we must attract and retain highly qualified personnel globally. Competition for these individuals in the San Francisco Bay Area, where our headquarters is located, and in other global locations, including where we maintain offices, is intense, especially for hiring experienced software engineers and sales professionals. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to recruit and retain highly skilled employees. Furthermore, we are limited in our ability to recruit internationally by restrictive domestic immigration laws. If we fail to attract new personnel or fail to identify, retain and motivate our current employees, our business and future growth prospects could be adversely affected.

Our revenue growth rate has fluctuated in prior periods and may decline again in the future.

Our revenue growth rate has fluctuated in prior periods. We have previously experienced periods of revenue growth rate decline and our revenue growth rate may decline again in future periods as the size of our customer base increases and as we achieve higher market penetration rates. In particular, we expect the growth rate of our subscription revenue to fluctuate from period to period, and in the near-term subscription revenue growth rates may be lower compared to comparable periods in the prior fiscal year. Many factors may also contribute to declines in our revenue growth rate, including slowing demand for our platform, increasing competition, a decrease in the growth of our overall market, weakened global economic conditions, including as a result of the COVID-19 pandemic, our failure to continue to capitalize on growth opportunities and the maturation of our business, among others. You should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. If our revenue growth rate declines, investors’ perceptions of our business and the trading price of our common stock could be adversely affected.

future performance. If our revenue growth rate declines, investors’ perceptions of our business and the trading price of our common stock could be adversely affected.

We invest significantly in research and development, and to the extent our research and development investments do not translate into new solutions or material enhancements to our current solutions, or if we do not use those investments efficiently, our business and results of operations would be harmed.

A key element of our strategy is to invest significantly in our research and development efforts to improve and develop new technologies, features and functionality for our platform. For the ~~three~~six months ended ~~April~~July 3031, 2021 and 2020 and for the years ended January 31, 2021 and 2020 our research and development expenses were 2324%, 2926%, 25% and 24%, of our revenue, respectively. If we do not spend our research and development budget efficiently or effectively, our business may be harmed and we may not realize the expected benefits of our strategy. Moreover, research and development projects can be technically challenging, time-consuming and expensive. The nature of these research and development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we are able to offer compelling platform updates and generate revenue, if any, from such investment. Additionally, anticipated enterprise demand for a solution or solutions we are developing could decrease after the development cycle has commenced, and we would nonetheless be unable to avoid substantial costs associated with the development of any such solutions or solution. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or improvement of solutions that are competitive in our current or future markets, our business and results of operations would be adversely affected.

expenses associated with research and development and the time we are able to offer compelling platform updates and generate revenue, if any, from such investment. Additionally, anticipated enterprise demand for a solution or solutions we are developing could decrease after the development cycle has commenced, and we would nonetheless be unable to avoid substantial costs associated with the development of any such solutions or solution. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or improvement of solutions that are competitive in our current or future markets, our business and results of operations would be adversely affected.

We may fail to accurately predict the optimal pricing strategies necessary to attract new customers, retain existing customers and respond to changing market conditions.

We have in the past, and may in the future, need to change our pricing model from time to time. As the market for our platform matures, or as competitors introduce new solutions that compete with ours, we may be unable to attract new customers at the same prices or based on the same pricing models that we have used historically. While we do and will attempt to set prices based on our prior experiences and customer feedback, our assessments may not be accurate, and we could be underpricing or overpricing our platform and professional services. In addition, if the offerings on our platform or our professional services change, then we may need to revise our pricing strategies. Any such changes to our pricing strategies or our ability to efficiently price our offerings could adversely affect our business, results of operations and financial condition. In addition, as we expand internationally, we also must determine the appropriate pricing strategy to enable us to compete effectively internationally. Pricing pressures and decisions could result in reduced sales, reduced margins, losses or the failure of our platform to achieve or maintain more widespread market acceptance, any of which could negatively impact our overall business, results of operations and financial condition. Moreover, larger organizations may demand substantial price concessions. As a result, we may be required to price below our targets in the future, which could adversely affect our revenue, gross margin, profitability, cash flows and financial condition.

If our investments to increase adoption of our platform by small and medium-sized businesses are not successful, our business, results of operations and financial condition may be adversely affected.

Historically, we have relied on sales of our platform to large enterprises for a significant majority of our revenue. We currently generate only a small portion of our revenue from enterprises that are mid-sized enterprises. Our ability to increase our customer base, especially among mid-sized enterprises, and achieve broader market acceptance of our platform will depend, in part, on our ability to effectively organize, focus and train our sales and marketing employees, develop efficient pricing and product strategies for mid-sized enterprise use cases and educate the mid-sized enterprise market about the benefits and features of our platform.

We have limited experience selling to mid-sized enterprises and only began hiring sales and marketing personnel with a mid-sized enterprise focus in 2018. Adapting our platform and marketing efforts to target the mid-sized enterprise market will require the diversion of significant resources that could otherwise be deployed to grow the business. If the costs of these sales and marketing efforts and investments do not result in corresponding increases in revenue, our business, results of operations, and financial condition may be adversely affected. In addition, small and mid-sized enterprises may have been disproportionately affected by the COVID-19 pandemic and the related measures taken to protect the public health such as stay-at-home orders. Many of these enterprises may be experiencing financial difficulties and may not be in a position to purchase our platform, which may adversely affect our revenue, business, results of operations and financial condition.

and the related measures taken to protect the public health such as stay-at-home orders. Many of these enterprises may be experiencing financial difficulties and may not be in a position to purchase our platform, which may adversely affect our revenue, business, results of operations and financial condition.

Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.

Increasing our customer base and achieving broader market acceptance of our platform will depend, to a significant extent, on our ability to effectively expand and manage our sales and marketing operations and activities. We are substantially dependent on our direct sales force and on our marketing efforts to obtain new customers. We believe that there is significant competition for experienced sales professionals with the sales skills and technical knowledge that we currently or may in the future require. Our ability to achieve revenue growth in the future will depend, in part, on our success in recruiting, training and retaining enough qualified and experienced sales professionals. New hires require significant training and time before they achieve full productivity, particularly in new sales segments, such as with mid-sized enterprises, and new industries or geographies. Our recent hires and planned hires may not become as productive as quickly as we expect, or at all, and we may be unable to hire or retain enough qualified individuals in the future in the markets and segments where we do business. Because we do not have a long history of expanding our sales force or managing a sales force at the scale that we intend to operate, we cannot accurately predict whether, or to what extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. Furthermore, due to our limited experience selling direct to mid-sized enterprises through our sales force, the results of any such efforts are difficult to predict and may result in diverted financial and management resources without a corresponding increase in revenue. Our business will be harmed if our sales expansion efforts do not generate a significant increase in revenue.

sales segments, such as with mid-sized enterprises, and new industries or geographies. Our recent hires and planned hires may not become as productive as quickly as we expect, or at all, and we may be unable to hire or retain enough qualified individuals in the future in the markets and segments where we do business. Because we do not have a long history of expanding our sales force or managing a sales force at the scale that we intend to operate, we cannot accurately predict whether, or to what extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. Furthermore, due to our limited experience selling direct to mid-sized enterprises through our sales force, the results of any such efforts are difficult to predict and may result in diverted financial and management resources without a corresponding increase in revenue. Our business will be harmed if our sales expansion efforts do not generate a significant increase in revenue.

Our sales cycle with enterprise, international and public sector clients can be long and unpredictable.

A substantial portion of our business is with large enterprises and, as we invest in other markets, we will increasingly do business with international enterprises and public sector entities. The timing of our sales with our enterprise, international, and public sector clients and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for these clients. We are often required to spend significant time and resources to educate and familiarize these potential clients with the value proposition of paying for our platform. The length of our sales cycle for these clients, from initial evaluation to payment for our platform is often around nine months or more and can vary substantially from client to client. As a result, it is difficult to predict whether and when a sale will be completed.

If we are unable to effectively operate on or capture data from mobile devices, our business could be adversely affected.

Our customers and users of our platform are increasingly accessing our platform or interacting via mobile devices. We are devoting valuable resources to solutions related to mobile usage and cannot assure you that these solutions will be successful. If the mobile solutions we have developed for our platform do not meet the needs of current or prospective customers, or if our solutions are difficult to access, customers or users may reduce their usage of our platform or cease using our platform altogether and our business could suffer. Additionally, we are dependent on the interoperability of our products with popular mobile networks and standards that we do not control, and any changes in such systems or terms of service that degrade our platform’s functionality or give preferential treatment to competitive products could adversely affect our business. As new mobile devices and products are continually being released, it is difficult to predict the challenges we may encounter in enhancing our platform for use on such devices. If we are unable to successfully implement elements of our platform on mobile devices, or if these strategies are not as successful as our offerings for personal computers or if we incur excessive expenses in this effort, our business, results of operations and financial condition would be negatively affected.

If we are unable to develop and maintain successful relationships with channel partners, our business, results of operations, and financial condition could be adversely affected.

To date, we have primarily relied on our direct sales force, online marketing and word-of-mouth to sell subscriptions to our platform. Although we have developed relationships with certain channel partners, such as referral partners, resellers and integration partners, these channels have resulted in limited revenue to date. We believe that continued growth in our business is dependent upon identifying, developing and maintaining strategic relationships with additional channel partners that can drive additional revenue. Our agreements with our existing channel partners are non-exclusive, meaning our channel partners may offer enterprises the products of several different companies, including products that compete with ours. They may also cease marketing our platform with limited notice and with little or no penalty. We expect that any additional channel partners we identify and develop will be similarly non-exclusive and not bound by any requirement to continue to market our platform. If we fail to identify additional channel partners in a timely and cost-effective manner, or at all, if we are unable to assist our current and future channel partners in independently selling and implementing our platform, or if our channel partners choose to use greater efforts to market their own products or those of our competitors, our business, results of operations and financial condition could be adversely affected. Furthermore, if our channel partners do not effectively market and sell our platform, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be adversely affected.

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referral partners, resellers and integration partners, these channels have resulted in limited revenue to date. We believe that continued growth in our business is dependent upon identifying, developing and maintaining strategic relationships with additional channel partners that can drive additional revenue. Our agreements with our existing channel partners are non-exclusive, meaning our channel partners may offer enterprises the products of several different companies, including products that compete with ours. They may also cease marketing our platform with limited notice and with little or no penalty. We expect that any additional channel partners we identify and develop will be similarly non-exclusive and not bound by any requirement to continue to market our platform. If we fail to identify additional channel partners in a timely and cost-effective manner, or at all, if we are unable to assist our current and future channel partners in independently selling and implementing our platform, or if our channel partners choose to use greater efforts to market their own products or those of our competitors, our business, results of operations and financial condition could be adversely affected. Furthermore, if our channel partners do not effectively market and sell our platform, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be adversely affected.

Sales by channel partners are more likely than direct sales to involve collection issues, in particular sales by our channel partners into developing markets, and accordingly, variations in the mix between revenue attributable to sales by channel partners and revenue attributable to direct sales may result in fluctuations in our results of operations.

Disputes with our customers and other third parties could be costly, time-consuming and harm our business and reputation.

Our business requires us to enter into agreements with a large number of customers and other third parties in many different jurisdictions. Our subscription and other agreements contain a variety of terms, including service levels, data privacy and security obligations, indemnification, dispute resolution procedures and regulatory requirements. Agreement terms may not be standardized across our business and can be subject to differing interpretations and local law requirements, which could result in disputes with our customers and other third parties from time to time. If our customers and other third parties notify us of a breach of contract or otherwise dispute the terms of our agreements, the dispute resolution process can be expensive and time-consuming and result in the diversion of resources that could otherwise be deployed to grow our business. Even if these disputes are resolved in our favor, we may be unable to recoup the expenses and other diverted resources committed to resolving the dispute and, if we receive negative publicity in connection with the dispute, our reputation and brand may be harmed. Furthermore, the ultimate resolution of such disputes may be adverse to our interests and as a result could adversely affect not only our brand but also our results of operations and financial condition.

If we are not able to maintain and enhance our brand, our business, results of operations and financial condition may be adversely affected.

We believe that maintaining and enhancing our reputation as a differentiated and category-defining company in experience management is critical to our relationships with our existing customers and key employees and to our ability to attract new customers and talented personnel. The successful promotion of our brand will depend on a number of factors, including our marketing efforts, our ability to continue to develop a high-quality platform and our ability to successfully differentiate our platform from competitive solutions. We do not have sufficient operating history to know if our brand promotion activities will ultimately be successful or yield increased revenue and, if they are not successful, our business may be adversely affected. Any unfavorable publicity of our business or platform generally, for example, relating to our privacy practices, terms of service, service quality, litigation, regulatory activity, the actions of our employees, partners or customers or the actions of other companies that provide similar solutions to us, all of which can be difficult to predict, could adversely affect our reputation and brand. In addition, independent industry analysts often provide reviews of our platform, as well as solutions offered by our competitors, and our brand and perception of our platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive compared to those of our competitors’ solutions, our brand and market position may be adversely affected. It may also be difficult to maintain and enhance our brand as we expand our marketing and sales efforts through channel or strategic partners.

The promotion of our brand also requires us to make substantial expenditures. We anticipate that these expenditures will increase as our market becomes more competitive, as we expand into new markets and as more sales are generated through our channel partners. To the extent that these activities yield increased revenue, this revenue may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand or incur substantial expenses in unsuccessful attempts to promote and maintain our brand, our business may not grow, we may have reduced pricing power relative to competitors and we could lose customers and key employees or fail to attract potential customers or talented personnel, all of which would adversely affect our business, results of operations and financial condition.

revenue may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand or incur substantial expenses in unsuccessful attempts to promote and maintain our brand, our business may not grow, we may have reduced pricing power relative to competitors and we could lose customers and key employees or fail to attract potential customers or talented personnel, all of which would adversely affect our business, results of operations and financial condition.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, which could harm our business.

We have worked to develop a strong culture around our team. We believe that our culture has been and will continue to be a key contributor to our success. We expect to hire aggressively as we expand but if we do not continue to maintain our corporate culture as we grow globally, we may be unable to foster the innovation, creativity and teamwork we believe we need to support our growth. Moreover, many of our employees may be able to receive significant proceeds from sales of our common stock in the public markets, which could lead to disparities of wealth among our employees that adversely affects relations among employees and our culture in general. Our substantial anticipated headcount growth may result in a change to our corporate culture, which could harm our business.

significant proceeds from sales of our common stock in the public markets, which could lead to disparities of wealth among our employees that adversely affects relations among employees and our culture in general. Our substantial anticipated headcount growth may result in a change to our corporate culture, which could harm our business.

We recognize revenue over the term of our customers’ contracts. Consequently, increases or decreases in new sales may not be immediately reflected in our results of operations and may be difficult to discern.

We generally recognize subscription revenue from customers ratably over the terms of their contracts and a majority of our revenue is derived from subscriptions that have terms of one to three years. As a result, a portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscriptions, including any declines attributable to the COVID-19 pandemic, in any single quarter may have a small impact on our revenue results for that quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our platform and potential changes in our pricing policies or rate of expansion or retention may not be fully reflected in our results of operations until future periods. We may also be unable to reduce our cost structure in line with a significant deterioration in sales. In addition, a significant majority of our costs are expensed as incurred, while revenue is recognized over the term of the agreements with our customers. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of our agreements. 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 customers may fail to pay us in accordance with the terms of their agreements, at times necessitating action by us to attempt to compel payment.

We typically enter into annual or multiple year arrangements with our customers. If our customers fail to pay us in accordance with the terms of our agreements, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our agreements, including litigation and arbitration costs. The risk of these issues increases with the term length of our customer arrangements. Furthermore, some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our results of operations, financial condition and cash flow.

Certain of our results of operations, key metrics and other financial metrics may be difficult to predict.

Our results of operations, key metrics and other financial metrics, including the levels of our revenue, gross margin, profitability, cash flow and deferred revenue, have fluctuated in the past and may vary significantly in the future. As a result, period-to-period comparisons of our results of operations, including key metrics, may not be meaningful and the results of any one period should not be relied upon as an indication of future performance. Our results of operations and other key metrics may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuation in results of operations and key metrics may negatively impact the value of our common stock. Factors that may cause fluctuations in our results of operations and key metrics include, without limitation, those listed below:

in results of operations and key metrics may negatively impact the value of our common stock. Factors that may cause fluctuations in our results of operations and key metrics include, without limitation, those listed below:

•fluctuations in the demand for our platform and the market for platforms like ours;

•our ability to attract new customers or retain existing customers;

•variability in our sales cycle, including as a result of the budgeting cycles and internal purchasing priorities of our customers or prospective customers;

•the payment terms and subscription term length associated with sales of our platform and their effect on our billings and cash flows;

•the addition or loss of large customers, including through acquisitions or consolidations;

•the timing of sales and recognition of revenue, which may vary as a result of changes in accounting rules and interpretations, such as the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASC 606);

•the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

•network outages or actual or perceived security breaches or other incidents;

•general economic, market and political conditions;

•public health crises and related measures to protect the public health (such as the COVID-19 pandemic);

•customer renewal rates;

•increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements;

•changes in our pricing policies or those of our competitors;

•the mix of services sold during a period;

•the timing of our recognition of stock-based compensation expense for our equity awards, particularly in cases where awards covering a large number of our shares are tied to a specific event or date; and

•the timing and success of introductions of new platform features and services by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners.

The cumulative effects of the factors discussed above could result in large fluctuations and unpredictability in our quarterly and annual results of operations. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or results of operations fall below the expectations of analysts or investors or below any guidance we may provide, or if the guidance we provide is below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even if we have met any previously publicly stated guidance we may provide.

Our results of operations may be difficult to predict as a result of seasonality.

Our results of operations may also fluctuate as a result of seasonality. We have seen seasonality in our sales cycle as a large percentage of our customers make their purchases in the fourth quarter of a given fiscal year and pay us in the first quarter of the subsequent year. We may also be affected by seasonal trends in the future, particularly as our business matures. Such seasonality may result from a number of factors, including a slowdown in our customers’ procurement process during certain times of the year, both domestically and internationally, and customers choosing to spend remaining budgets shortly before the end of their fiscal years. Additionally, this seasonality may be reflected to a much lesser extent, and sometimes may not be immediately apparent, in our revenue, due to the fact that we recognize subscription revenue over the term of the applicable subscription agreement. To the extent we experience this seasonality, it may cause fluctuations in our results of operations and financial metrics and make forecasting our future results of operations and financial metrics more difficult.

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, or at all.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. Our estimates and forecasts relating to size and expected growth of our target market may prove to be inaccurate. Even if the markets in which we compete meet our size estimates and growth forecasts, our business may not grow at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.

Risks Related to Our Intellectual Property

We may be sued by third parties for alleged infringement of their proprietary rights.

There is considerable patent and other intellectual property development activity in our industry. Our future success depends in part on not infringing upon the intellectual property rights of others. From time to time, we have received and may receive claims from third parties, including our competitors, that our platform and underlying technology infringe or violate a third party’s intellectual property rights, including patent rights, and we may be found to be infringing upon such rights. In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents, and our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. We may also be unaware of the intellectual property rights of others that may cover some or all of our technology. Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our products. Any claims or litigation, regardless of their merit, could cause us to incur significant expenses, pay substantial amounts in damages, ongoing royalty or license fees, or other payments, or could prevent us from offering all or portions of our platform or from using certain technologies, require us to re-engineer all or a portion of our platform or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners in connection with any such litigation and to obtain licenses or refund subscription fees, which could further exhaust our resources. Even if we were to prevail in the event of claims or litigation against us, any claim or litigation regarding our technology or intellectual property could be costly and time-consuming and divert the attention of our management and other employees from our business operations. Such disputes could also disrupt our platform and products, which would adversely impact our client satisfaction and ability to attract customers. In the case of infringement or misappropriation caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or misappropriation.

to be infringing upon such rights. In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents, and our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. We may also be unaware of the intellectual property rights of others that may cover some or all of our technology. Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our products. Any claims or litigation, regardless of their merit, could cause us to incur significant expenses, pay substantial amounts in damages, ongoing royalty or license fees, or other payments, or could prevent us from offering all or portions of our platform or from using certain technologies, require us to re-engineer all or a portion of our platform or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners in connection with any such litigation and to obtain licenses or refund subscription fees, which could further exhaust our resources. Even if we were to prevail in the event of claims or litigation against us, any claim or litigation regarding our technology or intellectual property could be costly and time-consuming and divert the attention of our management and other employees from our business operations. Such disputes could also disrupt our platform and products, which would adversely impact our client satisfaction and ability to attract customers. In the case of infringement or misappropriation caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or misappropriation.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.

Our agreements with customers and other third parties may include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons or other liabilities relating to or arising from our platform or our acts or omissions. In addition, customers typically require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their data stored, transmitted or processed by our platform. The terms of these contractual provisions often survive termination or expiration of the applicable agreement. Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition. Although we generally attempt to contractually limit the scope of our liability with respect to such obligations, we are not always successful, and we may incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our platform and harm our business, financial condition and results of operations.

obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our platform and harm our business, financial condition and results of operations.

Our platform utilizes open source software, which may subject us to litigation, require us to re-engineer our platform or otherwise divert resources away from our development efforts.

We use open source software in connection with our platform and products and operations. We could be subject to suits by parties claiming ownership of what we believe to be open source software, noncompliance with open source licensing terms or that our use of such software infringes a third party’s intellectual property rights. Some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code (which may include our modifications and/or product code into which such open source software has been integrated) on terms allowing further modification and redistribution and at no or nominal cost. The terms of many open source licenses have not been interpreted by U.S. or foreign courts, and these licenses could be construed in a way that could impose other unanticipated conditions or restrictions on our ability to commercialize our products. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose source code that we have decided to maintain as proprietary or that would otherwise breach the terms or fail to meet the conditions of an open source license or third-party contract, such use could inadvertently occur and we may as a result be subject to claims for breach of contract, infringement of intellectual property rights, or indemnity, required to release our proprietary source code, pay damages, royalties, or license fees or other amounts, seek licenses, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business.

license fees or other amounts, seek licenses, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

Our success and ability to compete depend in part upon our ability to secure, protect, maintain, assert and enforce our intellectual property. As of ~~April~~July 3031, 2021 we had 1922 issued patents and 2928 pending non-provisional or provisional patent applications filed. We rely on a combination of patent, copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers, partners, and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate, and our intellectual property may still be challenged or invalidated. We cannot guarantee that any of our pending applications will be approved or that our existing and future intellectual property rights will be sufficiently broad to protect our proprietary technology. Effective patent, copyright, trade secret and trademark protection may not even be available in every country in which we conduct business. Failure to comply with applicable procedural, documentary, fee payment and other similar requirements with the United States Patent and Trademark Office (USPTO), and various similar foreign governmental agencies could result in abandonment or lapse of the affected patent, copyright, or trademark application. If this occurs, our competitors might be more successful in their efforts to compete with us. Furthermore, we may not always detect infringement of our intellectual property rights, and any infringement of our intellectual property rights, even if successfully detected, prosecuted and enjoined, could be costly to deal with and could harm our business. In addition, other parties, including our competitors, may independently develop similar technology, duplicate our services or design around our intellectual property and, in such cases, we may not be able to assert our intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential information, and we may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. In the event that any of the foregoing occur, this could adversely affect our business, results of operations and financial condition.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and counter suits attacking the validity and enforceability of our intellectual property rights, which could result in the impairment or loss of portions of our intellectual property portfolio. An adverse determination of any litigation proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly and could put our related pending patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Our failure to secure, protect, maintain, assert and enforce our intellectual property rights could adversely affect our brand and business.

If we fail to integrate our platform with a variety of software applications, operating systems, platforms, and hardware that are developed by others, our platform may become less marketable, less competitive or obsolete and our business and results of operations would be harmed.

Our platform must integrate with a variety of network, hardware and software systems, including human resource information and customer relationship management systems, and we need to continuously modify and enhance our platform to adapt to changes in hardware, software, networking, browser and database technologies. In particular, we have developed our platform to be able to easily integrate with certain third-party SaaS applications, through the interaction of application programming interfaces (APIs). In general, we rely on the fact that the providers of such software systems continue to allow us access to their APIs to enable these customer integrations. To date, we have not relied on a long-term written contract to govern our relationship with these providers. Instead, we are subject to the standard terms and conditions for application developers of such providers, which govern the distribution, operation and fees of such software systems, and which are subject to change by such providers from time to time.

providers. Instead, we are subject to the standard terms and conditions for application developers of such providers, which govern the distribution, operation and fees of such software systems, and which are subject to change by such providers from time to time.

We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions.

Our success will depend, in part, on our ability to expand our platform and grow our business in response to changing technologies, customer demands and competitive pressures. We have in the past, and we may in the future, attempt to do so through strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products and other assets that we believe could complement, expand or enhance our platform or otherwise offer growth opportunities. WeFor example, we made a number of acquisitions during fiscal year ended January 31, 2020, including Zingle, a multi-channel mobile messaging and customer engagement solution, and in fiscal year ended January 31, 2021 we completed acquisitions of (i) LivingLens, a video feedback platform provider; (ii) Voci, a real-time speech to text platform; (iii) Stella Connect, a customer feedback and quality management platform that helps customer support teams analyze and improve performance in real time; and (iv) Sense360, a consumer insights platform that provides always-on, consumer and competitive intelligence from buyer and non-buyer segments. During the three months ended April 30, 2021, we completed the acquisitions of (i) CheckMarket, a survey solutions platform that helps customers automate the process quickly to make qualifications, and (ii) Decibel Inc., a leader in digital experience analytics . We may also enter into relationships with other businesses to expand our platform, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies.

Any acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their software is not easily adapted to work with our platform or we have difficulty retaining the customers of any acquired business due to changes in ownership, management or otherwise. Acquisitions, investments or other business relationships may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our existing business. Moreover, the anticipated benefits of any acquisition, investment or business relationship may not be realized or we may be exposed to unknown risks or liabilities. For example, acquired technologies, services and products that we believe are complementary and enhance our platform may not be construed that way by existing and prospective customers.

require significant management attention that would otherwise be available for development of our existing business. Moreover, the anticipated benefits of any acquisition, investment or business relationship may not be realized or we may be exposed to unknown risks or liabilities. For example, acquired technologies, services and products that we believe are complementary and enhance our platform may not be construed that way by existing and prospective customers.

Identifying and negotiating these transactions can be time-consuming, difficult and expensive, and our ability to complete these transactions may often be subject to approvals that are beyond our control. We cannot predict the number, timing or size of these transactions. Our prior acquisitions have been relatively small, and we are relatively inexperienced in effectively integrating another business with our own. Consequently, these transactions, even if announced, may not be completed. The risks we face in connection with these transactions include:

•the issuance of additional equity securities that would dilute our existing stockholders and adversely affects the value of our common stock;

•the use of substantial portions of our available cash and other resources that we may need in the future to operate our business;

•issuance of large charges or substantial liabilities;

•diversion of management’s attention from other business concerns;

•issuance of debt on terms unfavorable to us or that we are unable to repay;

•harm to our existing relationships with customers and partners as a result of the transaction;

•claims and disputes from stockholders and third parties, including intellectual property claims and disputes;

•difficulties retaining key employees or customers of the acquired business or integrating diverse software codes or business cultures; and

•adverse tax consequences, substantial depreciation deferred compensation charges or other unfavorable accounting treatment.

The occurrence of any of these risks could have an adverse effect on our business, results of operations and financial condition.

In addition, our entry into any future acquisition, investment or business relationship may be prohibited. In September 2020 we entered into the Wells Fargo Credit Facility with Wells Fargo Bank, National Association (Wells Fargo). The Wells Fargo Credit Facility restricts our ability to pursue certain mergers, acquisitions, amalgamations or consolidations that we may believe to be in our best interest.

Risks Related to Our International Operations

Our international sales and operations subject us to additional risks and challenges that can adversely affect our business, results of operations and financial condition.

As part of our growth strategy, we expect to continue to expand our international operations, which may include opening additional offices in new jurisdictions and providing our platform in additional languages. Any new markets or countries into which we attempt to sell subscriptions to our platform may not be receptive. We currently have sales personnel and sales and customer and product support operations in the United States and certain countries across Europe, the Asia Pacific region and the Americas. Our sales organization outside the United States is smaller than our sales organization in the United States and to date a limited portion of our sales has been driven by resellers or other channel partners. We believe our ability to attract new customers to our platform and to convince existing customers to renew or expand their use of our platform is directly correlated to the level of engagement we achieve with our customers. To the extent we are unable to effectively engage with non-U.S. customers due to our limited sales force capacity and limited channel partners, we may be unable to effectively grow in international markets.

Our international operations also subject us to a variety of additional risks and challenges, including:

•increased exposure to public health issues, such as the COVID-19 pandemic;

•increased management, travel, infrastructure and legal compliance costs associated with having operations in multiple jurisdictions;

•providing our platform and operating our business across a significant distance, in different languages, among different cultures and time zones, including the potential need to modify our platform and products to ensure that they are culturally appropriate and relevant in different countries;

•compliance with foreign privacy and security laws and regulations, including data localization requirements, and the risks and costs of non-compliance;

•longer payment cycles and difficulties enforcing agreements, collecting trade and other receivables or satisfying revenue recognition criteria, especially in emerging markets;

•hiring, training, motivating and retaining highly-qualified personnel, while maintaining our unique corporate culture;

•increased financial accounting and reporting burdens and complexities;

•longer sales cycle and more time required to educate enterprises on the benefits of our platform outside of the United States;

•requirements or preferences for domestic products;

•limitations on our ability to sell our platform and for our solution to be effective in foreign markets that have different cultural norms and related business practices that de-emphasize the importance of positive customer and employee experiences;

•differing technical standards, existing or future regulatory and certification requirements and required features and functionality;

•political and economic conditions and uncertainty in each country or region in which we operate and general economic and political conditions and uncertainty around the world;

•compliance with laws and regulations for foreign operations, including anti-bribery laws, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual ~~limitations on our ability to sell our platform in certain foreign markets, and the risks and costs of non-compliance;~~

limitations on our ability to sell our platform in certain foreign markets, and the risks and costs of non-compliance;

•heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial condition and result in restatements of our consolidated financial statements;

•fluctuations in currency exchange rates and related effects on our results of operations;

•difficulties in repatriating or transferring funds from or converting currencies in certain countries, including due to foreign exchange currency controls put in place by foreign governments;

•communication and integration problems related to entering new markets with different languages, cultures and political systems;

•new and different sources of competition;

•differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries;

•the need for localized subscription agreements;

•the need for localized language support and difficulties associated with delivering support, training and documentation in languages other than English;

•increased reliance on channel partners;

•reduced protection for intellectual property rights in some countries and practical difficulties of enforcing such rights abroad; and

•compliance with the laws of numerous foreign taxing jurisdictions, including withholding tax obligations, and overlapping of different tax regimes.

Any of these risks and challenges could adversely affect our operations, reduce our revenue or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition and growth prospects. Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.

Compliance with laws and regulations applicable to our international operations substantially increases our cost of doing business. We may be unable to keep current with changes in government requirements as they change from time to time. Failure to comply with these regulations could have adverse effects on our business. In many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. or other regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that our employees, contractors, partners and agents will comply with these laws and policies. Violations of laws or our policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences and increased costs, including the costs associated with defending against such actions, or the prohibition of the importation or exportation of our platform and related services, each of which could adversely affect our business, results of operations and financial condition.

61Further, risks associated with operating in Israel may adversely affect our business. We have operations in Israel through our wholly-owned subsidiary, Medallia Digital Ltd. and Cooladata Ltd. As of July 31, 2021, we had a total of 58 employees located in Israel, of which 52 were engaged in research and development and SaaS operations activities. Given our employee headcount in Israel, our business, results of operations and financial condition could be adversely affected by political, economic and military instability in Israel, including, for example, the ongoing hostilities between Israel and the Palestinians. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and neighboring countries. Any hostilities involving Israel or a full or partial mobilization of the reserve forces of the Israeli armed forces could adversely affect our operations in Israel. In addition, some of our employees in Israel are obligated to perform up to 40 days, depending on rank and position, of military reserve duty annually and are subject to being called for active duty under emergency circumstances. Increased military activity could also result in a reduction of qualified prospective employees available to grow our business or to replace employees on active military duty. As a result, our business could be disrupted by the absence of our employees for a significant period of time as a result of military service. Additionally, the interruption or curtailment of trade between Israel and its present trading partners or a significant downturn in the economic or financial conditions in Israel could adversely affect our operations. In the past, the

many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. or other regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that our employees, contractors, partners and agents will comply with these laws and policies. Violations of laws or our policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences and increased costs, including the costs associated with defending against such actions, or the prohibition of the importation or exportation of our platform and related services, each of which could adversely affect our business, results of operations and financial condition.66

Further, risks associated with operating in Israel may adversely affect our business. We have operations in Israel through our wholly-owned subsidiary, Medallia Digital Ltd. and Cooladata Ltd. As of April 30, 2021, we had a total of 61 employees located in Israel, of which 55 were engaged in research and development and SaaS operations activities. Given our employee headcount in Israel, our business, results of operations and financial condition could be adversely affected by political, economic and military instability in Israel, including, for example, the ongoing hostilities between Israel and the Palestinians. Since the establishment of the State of Israel ~~in 1948, a number of armed conflicts have taken place between Israel~~ and ~~neighboring countries. Any hostilities involving Israel or a full or partial mobilization of the reserve forces of the~~ Israeli armed forces could adversely affect our operations in Israel. In addition, some of our employees in Israel are obligated to perform up to 40 days, depending on rank and position, of military reserve duty annually and are subject to being called for active duty under emergency circumstances. Increased military activity could also result in a reduction of qualified prospective employees available to grow our business or to replace employees on active military duty. As a result, our business could be disrupted by the absence of our employees for a significant period of time as a result of military service. Additionally, the interruption or curtailment of trade between Israel and its present trading partners or a significant downturn in the economic or financial conditions in Israel could adversely affect our operations. In the past, the State of Israel and Israeli companies have been subjected to an economic boycott and several countries still restrict business and trade activity with the State of Israel and with Israeli companies. These restrictive laws and policies could also have an adverse impact on our business and results of operations.

We believe our success depends on continuing to invest in the growth of our worldwide operations by entering new geographic markets. If our investments in these markets are greater than anticipated, or if our customer growth or sales in these markets do not meet our expectations, our results of operations and financial condition may be adversely affected.

We believe our success depends on expanding our business into new geographic markets and attracting customers in countries other than the United States. We anticipate continuing to expand our operations worldwide and have made, and will continue to make, substantial investments and incur substantial costs as we enter new geographic markets. This includes investments in data centers, cloud-based infrastructure and applications and other information technology investments, sales, marketing and administrative personnel and facilities. Often we must make these investments when it is still unclear whether future sales in the new market will justify the costs of these investments. In addition, these investments may be more expensive than we initially anticipated. If our investments are greater than we initially anticipate or if our customer growth or sales in these markets do not meet our expectations or justify the cost of the initial investments, our results of operations and financial condition may be adversely affected.

Risks associated with operating in Argentina could have an impact on our results of operations.

A significant number of our research and development employees are located in Argentina, and therefore, a portion of our operating expenses are denominated in Argentine pesos. As of ~~April~~July 3031, 2021, we had a total of ~~282~~295 employees located in Argentina, of which ~~256~~266 were engaged in research and development and SaaS operations activities. If the peso strengthens against the U.S. dollar, it could have a negative impact on our results of operations as it would increase our operating expenses. Our business activities in Argentina also subject us to risks associated with changes in and interpretations of Argentine law, including laws related to employment, the protection and ownership of intellectual property and U.S. ownership of Argentine operations. Furthermore, if we had to scale down or close our Argentine operations, there would be significant time and cost required to relocate those operations elsewhere, which could have an adverse impact on our overall cost structure.

The Argentine government has historically exercised significant influence over the country’s economy. For example, on September 1, 2019, the Argentine government enacted foreign exchange currency controls. These controls include restrictions on Argentine citizens and Argentinian companies’ abilities to purchase U.S. dollars, transfer money to foreign accounts, and make payments of dividends or payments for services by related parties without permission from the Argentine government. These controls, and other restrictions that may be enacted in the future, could adversely affect our business by making it more difficult to fund our operations in Argentina, including cash compensation programs for our employees based there. Additionally, such controls and other restrictions that may be enacted in the future, and any interpretations thereof, could materially hinder our ability to administer, and our Argentine employees’ ability to participate in, our equity compensation programs. An interruption to our Argentine business operations due to currency controls, or any adverse impact to our compensation programs for our employees, could lead to a drop in productivity and employee morale and lead to an adverse effect on our business.

Additionally, the country’s legal and regulatory frameworks have at times suffered radical changes due to political influence and significant political uncertainties. In the past, government policies in Argentina included expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of creditors’ rights, new taxation policies, including royalty and tax increases and retroactive tax claims and changes in laws and policies affecting foreign trade and investment. Such policies could destabilize the country and adversely affect our business and operating expenses.

In addition, Argentina has experienced labor unrest over wages and benefits paid to workers. In the past, the Argentine government has passed laws, regulations and decrees requiring companies in the private sector to maintain minimum wage levels and provide specified benefits to employees and may do so again in the future. Employers have also experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. In addition, inflation levels in Argentina have been elevated for several years. In the first half of 2018, Argentina's reported inflation rates began to increase dramatically and the Argentine central bank significantly increased interest rates in an effort to combat inflation. Based on Argentina's reported inflation rates and trends, we designated Argentina as a highly inflationary economy for accounting purposes as of the beginning of the third quarter of the fiscal year ended January 31, 2019. Any disruptions, labor unrest or increased personnel-related expenses in Argentina, including due to inflation, could have a material and adverse effect on our business and operating expenses.

wages and to provide additional employee benefits. In addition, inflation levels in Argentina have been elevated for several years. In the first half of 2018, Argentina's reported inflation rates began to increase dramatically and the Argentine central bank significantly increased interest rates in an effort to combat inflation. Based on Argentina's reported inflation rates and trends, we designated Argentina as a highly inflationary economy for accounting purposes as of the beginning of the third quarter of the fiscal year ended January 31, 2019. Any disruptions, labor unrest or increased personnel-related expenses in Argentina, including due to inflation, could have a material and adverse effect on our business and operating expenses.

We face exposure to foreign currency exchange rate fluctuations, and if foreign currency exchange rates fluctuate substantially in the future, our results of operations and financial condition, which are reported in U.S. dollars, could be adversely affected.

We conduct our business in countries around the world and a portion of our transactions outside the United States are denominated in currencies other than the U.S. dollar. While we have primarily transacted with customers and vendors in U.S. dollars to date, we have from time to time transacted in foreign currencies for subscriptions to our platform and may significantly expand the number of transactions with customers that are denominated in foreign currencies in the future. The majority of our international costs are also denominated in local currencies. In addition, our international subsidiaries maintain net assets or liabilities that are denominated in currencies other than the functional operating currencies of these entities. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and results of operations due to transactional and translational remeasurements that are reflected in our results of operations. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.

We currently maintain a program to hedge transactional exposures in foreign currencies. We use derivative instruments, such as foreign currency forward contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments. There can be no assurance that we will be successful in managing our exposure to currency exchange rate risks, which may adversely affect our business, results of operations and financial condition.

Risks Related to Laws and Regulations

Our business is subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing and which could subject us to claims or otherwise harm our business.

We are subject to a variety of laws in the United States and internationally, including laws regarding privacy, data protection, data security, data retention and consumer protection, accessibility, sending and storing of electronic messages (and related traffic data where applicable), intellectual property, human resource services, employment and labor laws, workplace safety, consumer protection laws, anti-bribery and anti-corruption laws, import and export controls, immigration laws, securities laws and tax regulations, all of which are continuously evolving and developing. The scope and interpretation of these laws, regulations and other obligations that are or may be applicable to us, our customers or partners are often uncertain and may be conflicting, particularly laws and other obligations outside of the United States.

In addition, regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning privacy, spam, data storage, data protection, data collection, content regulation, cybersecurity, government access to personal information and private data and other matters that may be applicable to our business. Compliance with these laws may require substantial investments or may provide technical challenges for our business. More countries are enacting and enforcing laws related to the appropriateness of content and enforcing those and other laws by blocking access to services that are found to be out of compliance. It is also likely that as our business grows and evolves, as an increasing portion of our business shifts to mobile, and as our solutions are used in a greater number of countries and by additional groups, we will become subject to laws and regulations in additional jurisdictions. Our customers could also abuse or misuse our platform in ways that violate laws or cause damage to our business. It is difficult to predict how existing laws will be applied to our business and whether we will become subject to new laws or legal obligations that will impact our business.

laws or cause damage to our business. It is difficult to predict how existing laws will be applied to our business and whether we will become subject to new laws or legal obligations that will impact our business.

If we are not able to comply with these laws, regulations or other legal obligations, or if we, our customers or partners become liable under these laws or legal obligations, or if the use of our platform is suspended or blocked, even in part, we could be directly harmed and we may be forced to implement new measures to reduce exposure to this liability. This may require us to expend substantial resources or to discontinue certain solutions, which would negatively affect our business, results of operations and financial condition. We could also be subject to investigations, enforcement actions and sanctions, mandatory changes to our platform, disgorgement of profits, fines and damages, civil and criminal penalties or injunctions, claims for damages, termination of contracts and loss of intellectual property rights. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or brand or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business, results of operations and financial condition.

Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our platform and adversely affect our business.

Our customers can use our platform to collect, use and store personal data regarding their employees, customers and partners. We also collect, use and receive such information in the course of our operations. We and our customers may be subject to privacy-and data protection-related laws and regulations that impose obligations in connection with the collection, processing and use of financial data, health-related data and other types of personal data. The U.S. federal and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of data, including personal data, of individuals. For example, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), establishes privacy and security standards that limit the use and disclosure of individually identifiable health information and requires the implementation of administrative, physical and technical safeguards to protect the privacy of protected health information and ensure the confidentiality, integrity and availability of electronic protected health information by certain institutions. We act as a “business associate” through our relationships with certain customers and are thus directly subject to certain provisions of HIPAA. The U.S. Federal Trade Commission and numerous state attorneys general also are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.

Laws and regulations relating to data processing and data protection are particularly stringent in Europe and Asia, and in the financial services and healthcare industries, among others. Numerous foreign countries and governmental bodies, including the European Union (EU), and its member states, have laws and regulations concerning the collection and processing of personal data obtained from individuals located in their jurisdictions, which often are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, security and other processing of data that identifies or may be used to identify an individual, such as names, telephone numbers, email addresses and, in some jurisdictions, data such as IP addresses and other online identifiers.

For example, the EU has adopted a General Data Protection Regulation (GDPR), which took full effect on May 25, 2018. The GDPR enhances data protection obligations for businesses and requires service providers processing personal data on behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenue. Our efforts to meet GDPR requirements have required significant time and resources, including a review of our technology and systems against its requirements.

Further, following a referendum in June 2016 in which voters in the United Kingdom approved an exit from the EU, the United Kingdom has initiated a process to leave the EU, generally referred to as Brexit. Brexit resulted in the United Kingdom exiting from the EU on January 31, 2020 subject to a transition period covering certain matters that ended on December 31, 2020. The United Kingdom has implemented legislation that substantially implements the GDPR, with penalties for noncompliance of up to the greater of £17.5 million or four percent of worldwide revenue. Aspects of United Kingdom data protection laws and regulations remain unclear, however, ~~including how they will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated.~~

including how they will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated.

Additionally, although we participate in and have certified our compliance with the European Union (EU)-

U.S. and Swiss-U.S. Privacy Shield Framework with respect to personal data that we collect, which is subject to the investigatory and enforcement powers of the U.S. Federal Trade Commission, and have historically relied upon the U.S.-EU and U.S.-Swiss Privacy Shield Frameworks, and certain standard contractual clauses approved by the EU Commission (the SCCs), with regard to our transfer of certain personal data from the EU and Switzerland to the United States, both the EU-U.S. Privacy Shield Framework and the SCCs have been subject to legal challenge, and on July 16, 2020, the Court of Justice of the European Union (CJEU), Europe's highest court, held in the Schrems II case that the EU-U.S. Privacy Shield Framework was invalid, and imposed additional obligations in connection with use of the SCCs. The Swiss Federal Data Protection and Information Commissioner also has stated that it no longer considers the Swiss-U.S. Privacy Shield Framework adequate for the purposes of personal data transfers from Switzerland to the U.S. We are assessing the impacts of the Schrems II decision in light of current and anticipated guidance from regulators and the issuance by the European Commission of new SCCs in June 2021. We and many other companies may need to implement different or additional measures to establish or maintain legitimate means for the transfer and receipt of personal data from the EU and Switzerland to the U.S., and we may, in addition to other impacts, experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators to apply different standards to cross-border data transfers and to block, or require ad hoc verification of measures taken with respect to, certain data flows. We and our customers may face a risk of enforcement actions relating to personal data transfers, and we may experience hesitancy, reluctance or refusal by European or multinational enterprises to use our services due to potential risk exposure to such enterprises relating to cross-border data transfer.

Furthermore, outside of the EU, we continue to see increased regulation of data privacy and security, including the adoption of more stringent laws in the United States. For example, in June 2018 California enacted the California Consumer Privacy Act (CCPA). The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA went into effect on January 1, 2020. Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in the November 3, 2020 election. The CPRA will significantly modify the CCPA, creating obligations beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement commencing July 1, 2023. On March 2, 2021, Virginia enacted the Virginia Consumer Data Protection Act (CDPA), which becomes effective on January 1, 2023, and on June 8, 2021, Colorado enacted the Colorado Privacy Act (CPA), which takes effect on July 1, 2023. The CPA and CDPA share similarities with the CCPA, CPRA, and legislation proposed in other states. Aspects of these state statutes and their interpretation and enforcement remain unclear, and these laws may increase our compliance costs and potential liability.

enforcement commencing July 1, 2023. Aspects of the CCPA, the CPRA, and their interpretation and enforcement remain unclear, and these laws may increase our compliance costs and potential liability.

Some countries also are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of delivering our services. In addition to government activity, privacy advocacy groups and certain industries have imposed or are considering various new, additional or different industry standards that may place additional burdens on us, and we may be contractually obligated to comply with these standards or we may be otherwise considered subject to them. We also are subject to other contractual obligations relating to privacy, data protection and information security.

With laws, regulations and other obligations relating to privacy, data protection, and information security imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other obligations, we may face challenges in addressing their requirements and making necessary changes to our policies and practices, and may incur significant costs and expenses in an effort to do so. Additionally, if third parties we work with, such as vendors or service providers, violate applicable laws or regulations or our policies, such violations may also put our or our customers’ data at risk and could in turn have an adverse effect on our business. Any failure or perceived failure by us or our service providers to comply with our applicable policies or notices relating to privacy or data protection, our contractual or other obligations to customers or other third parties, or any of our other legal obligations relating to privacy, data protection or information security, may result in governmental investigations or enforcement actions, litigation, claims or public statements against us by privacy advocacy groups or others, and could result in significant liability or cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

result in governmental investigations or enforcement actions, litigation, claims or public statements against us by privacy advocacy groups or others, and could result in significant liability or cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

The costs of compliance with, and other burdens imposed by, laws, regulations and other obligations relating to privacy, data protection and information security applicable to the businesses of our customers may adversely affect our customers’ ability and willingness to process, handle, store, use and transmit information from their employees, customers and partners, which could limit the use, effectiveness and adoption of our platform and reduce overall demand. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption, effectiveness or use of our applications. The rapid development of laws, regulations and other obligations relating to privacy, data protection and information security throughout the world, and the dynamic nature of their interpretation and enforcement, make it difficult to predict compliance requirements.

We are subject to governmental export and import controls and economic sanctions laws and regulations that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.

Our business activities are subject to various restrictions under U.S. export and similar laws and regulations, including the United States Department of Commerce’s Export Administration Regulations (EAR), and various economic and trade sanctions regulations administered by the United States Treasury Department’s Office of Foreign Assets Controls (OFAC). The U.S. export control laws and economic sanctions laws include restrictions or prohibitions on the sale or supply of certain products and services to certain embargoed or sanctioned countries, governments, persons and entities. In addition, we may incorporate encryption technology into certain of our offerings, and encryption offerings and the underlying technology may be exported outside of the United States only with the required export authorizations, including by license, and we cannot guarantee that any required authorization will be obtained. If we are found to be in violation of U.S. economic sanctions or export control laws, it could result in substantial fines and penalties for us and for the individuals working for us. We may also experience other adverse effects, including reputational harm and loss of access to certain markets.

In addition, various countries regulate the import of certain technology and have enacted or could enact laws that could limit our ability to provide our customers access to our platform or could limit our customers’ ability to access or use our platform in those countries. Changes in our platform or future changes in export and import regulations may prevent our customers with international operations from utilizing our platform globally or, in some cases, prevent the export or import of our platform to certain countries, governments or persons altogether. Any decreased use of our platform or limitation on our ability to export or sell our platform could adversely affect our business, results of operations and financial condition.

Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the FCPA), the U.K. Bribery Act and other anticorruption, anti-bribery and anti-money laundering laws in the jurisdictions in which we do business, both domestic and abroad. These laws generally prohibit us and our employees from improperly influencing government officials or commercial parties in order to obtain or retain business, direct business to any person or gain any advantage. The FCPA, U.K. Bribery Act and other applicable anti-bribery and anti-corruption laws also may hold us liable for acts of corruption and bribery committed by our third-party business partners, representatives and agents. In addition to our own sales force, we leverage third parties to sell our products and conduct our business abroad. We and our third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners and agents, even if we do not explicitly authorize such activities. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. While we have policies and procedures to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in violation of our policies or applicable law, for which we may be ultimately held responsible and our exposure for violating these laws increases as our international presence expands and as we increase sales and operations in foreign jurisdictions. Any violation of the FCPA, U.K. Bribery Act or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management’s attention, a decline in the market price of our common stock or overall adverse consequences to our reputation and business, all of which may have an adverse effect on our results of operations and financial condition.

operations in foreign jurisdictions. Any violation of the FCPA, U.K. Bribery Act or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management’s attention, a decline in the market price of our common stock or overall adverse consequences to our reputation and business, all of which may have an adverse effect on our results of operations and financial condition.

Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

Sales and use, value added and similar tax laws and rates vary greatly by jurisdiction. Taxing authorities in certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties, and interest, or future requirements may adversely affect our results of operations.

Our international operations subject us to potentially adverse tax consequences.

We generally conduct our international operations through subsidiaries and are subject to income taxes as well as non-income-based taxes, such as payroll, value-added, goods and services and other local taxes. Our domestic and international tax liabilities are subject to various jurisdictional rules regarding the calculation of taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the value of assets sold or acquired or income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.

Unanticipated changes in our tax rates could affect our future results of operations. Our tax expense could also be impacted by changes in, or interpretations of, tax rules and regulations regarding non-deductible expenses, excess tax benefits of equity-based compensation, the applicability of withholding taxes and the impact of changes in the evaluation of tax positions we have taken in prior tax periods. Our future effective tax rates could be unfavorably affected by changes in tax laws or the interpretation of tax laws, or by changes in the valuation of our deferred tax assets and liabilities. Additionally, the Organization for Economic Co-Operation and Development (OECD) has released guidance covering various topics, including transfer pricing, country-by-country reporting and definitional changes to permanent establishment that could ultimately impact our tax liabilities as countries adopt the OECD’s guidance.

(OECD) has released guidance covering various topics, including transfer pricing, country-by-country reporting and definitional changes to permanent establishment that could ultimately impact our tax liabilities as countries adopt the OECD’s guidance.

We are subject to potential tax examinations of our tax returns by the Internal Revenue Service (the IRS), and other domestic and foreign tax authorities. An adverse outcome of any such audit or examination by the IRS or other tax authority could have a material adverse effect on our results of operations and financial condition.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a variety of jurisdictions. There can be no assurance that our tax positions and methodologies or calculation of our tax liabilities are accurate or that the outcomes from future tax examinations will not have an adverse effect on our results of operations and financial condition. A difference in the ultimate resolution of tax uncertainties from what is currently estimated could have an adverse effect on our results of operations and financial condition.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

As of January 31, 2021 we had federal and state net operating loss (NOL) carryforwards of approximately $822.5 million and $404.3 million, respectively. The federal NOL will begin to expire in 2031 and state NOL will begin to expire in 2022. As of January 31, 2021 we had federal and state research and development (R&D) tax credit carryforwards of approximately $20.6 million and $16.8 million, respectively. The federal R&D credit will begin to expire in 2029 and state R&D credit does not expire. In general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs and other tax attributes including R&D tax credits to offset future taxable income. Similar rules apply under state tax laws.

Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Internal Revenue Code (the Code) (or applicable state tax laws). Furthermore, our ability to utilize NOLs and other tax attributes of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs and R&D tax credits by certain jurisdictions, including in order to raise additional revenue to help counter the fiscal impact from the COVID-19 pandemic, possibly with retroactive effect, or other unforeseen reasons, our existing NOLs and R&D tax credits could expire or otherwise be unavailable to offset future income tax liabilities. A temporary suspension of the use of certain NOLs and tax credits has been enacted in California, and other states may enact legislation as well. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs and R&D tax credits, whether or not we attain profitability.

Our business could be adversely impacted by changes in laws and regulations related to the Internet or changes in access to the Internet generally.

The future success of our business depends upon the continued use of the Internet as a primary medium for communication, business applications and commerce. Federal or state government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial medium. Legislators, regulators or government bodies or agencies may also make legal or regulatory changes or interpret or apply existing laws or regulations that relate to the use of the Internet in new and materially different ways. Changes in these laws, regulations or interpretations could require us to modify our platform in order to comply with these changes, to incur substantial additional costs or divert resources that could otherwise be deployed to grow our business, or expose us to unanticipated civil or criminal liability, among other things.

In addition, government agencies and private organizations have imposed, and may in the future impose, additional taxes, fees or other charges for accessing the Internet or commerce conducted via the Internet. Internet access is frequently provided by companies that have significant market power and could take actions that degrade, disrupt or increase the cost of our customers’ use of our platform, which could negatively impact our business. In December 2017 the Federal Communications Commission (FCC), voted to repeal its “net neutrality” Open Internet rules, effective June 2018. The rules were designed to ensure that all online content is treated the same by internet service providers and other companies that provide broadband services. The FCC’s new rules, which took effect on June 11, 2018 repealed the neutrality obligations imposed by the Open Internet rules and granted providers of broadband internet access services greater freedom to make changes to their services, including, potentially, changes that may discriminate against or harm our business. Should the net neutrality rules be relaxed or eliminated, we could incur greater operating expenses or our customers’ use of our platform could be adversely affected, either of which could harm our business and results of operations.

service providers and other companies that provide broadband services. The FCC’s new rules, which took effect on June 11, 2018 repealed the neutrality obligations imposed by the Open Internet rules and granted providers of broadband internet access services greater freedom to make changes to their services, including, potentially, changes that may discriminate against or harm our business. Should the net neutrality rules be relaxed or eliminated, we could incur greater operating expenses or our customers’ use of our platform could be adversely affected, either of which could harm our business and results of operations.

These developments could limit the growth of Internet-related commerce or communications generally or result in reductions in the demand for Internet-based platforms and services such as ours, increased costs to us or the disruption of our business. In addition, as the Internet continues to experience growth in the numbers of users, frequency of use and amount of data transmitted, the use of the Internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease-of-use, accessibility and quality of service. The performance of the Internet and its acceptance as a business tool has been adversely affected by “viruses,” “worms” and similar malicious programs and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the Internet generally, or our platform specifically, is adversely affected by these or other issues, we could be forced to incur substantial costs, demand for our platform could decline and our results of operations and financial condition could be harmed.

Servicing our current and future debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness. Our payment obligations under such indebtedness may limit the funds available to us, and the terms of our debt agreements may restrict our flexibility in operating our business or otherwise adversely affect our results of operations.

In September 2020, we issued a $575.0 million aggregate principal amount of convertible senior notes (the Notes) in a private placement to qualified institutional buyers. See "Note 9: Debt" to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for further information on our outstanding debt obligations. As of ~~April~~July 3031, 2021, we had $575.0 million of indebtedness for borrowed money outstanding.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.

In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences. For example, it could:

•make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry and competitive conditions and adverse changes in government regulation;

•limit our flexibility in planning for, or reacting to, changes in our business and our industry;

•place us at a disadvantage compared to our competitors who have less debt;

•limit our ability to borrow additional amounts to fund acquisitions, for working capital and for other general corporate purposes; and

•make an acquisition of our company less attractive or more difficult.

Further, the LIBOR is expected to be fully phased out as a benchmark by June 2023. If new methods of calculating LIBOR are established or if other benchmark rates used to price indebtedness or investments are established, the terms of any existing or future indebtedness or investments may be negatively impacted, resulting in increased interest expense or lower than expected interest income.

established, the terms of any existing or future indebtedness or investments may be negatively impacted, resulting in increased interest expense or lower than expected interest income.

In addition, under certain of our existing debt instruments, we are subject to customary affirmative and negative covenants regarding our business and operations, including limitations on our ability to enter into certain acquisitions or consolidations or engage in certain asset dispositions. Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital to pursue business opportunities, including potential acquisitions or divestitures. Any default under our debt arrangements could require that we repay our loans immediately, and may limit our ability to obtain additional financing, which in turn may have an adverse effect on our cash flows and liquidity.

Any of these factors could harm our business, results of operations and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

We have funded our operations since inception primarily through subscription payments by our customers for use of our platform, equity and debt financings, finance lease arrangements and loans for equipment. For example, in September 2020, we issued $575.0 million aggregate principal amount of convertible senior notes (Notes). We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in the level of subscriptions for our platform or unforeseen circumstances.

We evaluate financing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our operating performance and the condition of the capital markets at the time we seek financing. We may not be able to timely secure additional equity or debt financing on favorable terms, or at all. If we engage in any debt financing, such as the issuance of the Notes, the holders of debt would have priority over the holders of common stock. The holders of debt could impose restrictions on our business during the time the loan is outstanding, including restrictive covenants relating to financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. The holders of debt may also obtain security interests on our assets enabling the debt holders to seize and take ownership or dispose of the property, whether tangible or intangible, in which they have a security interest if we default on repayment of the loan or any of the conditions associated with the loan. We may also be required to take other actions that would be in the interests of the debt holders and force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations and financial condition. The Wells Fargo Credit Facility prohibits us from incurring additional indebtedness without Wells Fargo's prior written consent. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited, and our business, results of operations and financial condition could be adversely affected.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.

The Notes are convertible prior to June 15, 2025 under certain conditions, including upon effectiveness of the Merger. In the event the conditional conversion feature of the Notes is triggered, holders of such Notes will be entitled under the Indenture governing such Notes to convert their Notes at any time during specified periods at their option. If one or more holders of Notes elect to convert such Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, in certain circumstances, such as conversion by holders or redemption, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

We are subject to counterparty risk with respect to the capped call transactions.

In connection with the issuance of the Notes, we entered into the Capped Calls. The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Capped Calls. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Capped Calls with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties.

The terms of the Wells Fargo Credit Facility require us to meet certain operating and financial covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

The Wells Fargo Credit Facility contains customary affirmative and negative covenants that either limit our ability to, or, if we make future draws, require a mandatory prepayment in the event we, incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements and enter into various specified transactions. As a result, we may not be able to engage in any of the foregoing transactions unless we obtain the consent of our lender or prepay any outstanding amount under the Wells Fargo Credit Facility. The Wells Fargo Credit Facility also contains certain financial covenants, including minimum liquidity and maximum consolidated senior secured leverage ratio requirements, and financial reporting requirements. Our obligations under the Wells Fargo Credit Facility are secured by substantially all of our property, with limited exceptions, including our intellectual property. We may not be able to generate sufficient cash flow or sales to meet our financial covenants or, if we make future draws, pay the principal and interest under the Wells Fargo Credit Facility. Furthermore, if we made a subsequent draw, our future working capital, borrowings or equity financings could be unavailable to repay or refinance the amounts outstanding under the Wells Fargo Credit Facility. In the event of a liquidation, our lender would be repaid all outstanding principal and interest prior to distribution of assets to unsecured creditors, and the holders of our common stock would receive a portion of any liquidation proceeds only if all of our creditors, including our lenders, were first repaid in full. Any declaration by our lender of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

If we draw on the Wells Fargo Credit Facility, our ability to make scheduled payments or to refinance such debt obligations depends on numerous factors, including the amount of our cash balances and our actual and projected financial and operating performance. We may be unable to maintain a level of cash balances or cash flows sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We may not be able to take any of these actions, and even if we are, these actions may be insufficient to permit us to meet our scheduled debt service obligations. In addition, in the event of our breach of the Wells Fargo Credit Facility, we may be required to repay any outstanding amounts earlier than anticipated. If for any reason we become unable to service our debt obligations under the Wells Fargo Credit Facility, or any new debt obligations that we may enter into from time to time, holders of our common stock would be exposed to the risk that their holdings could be lost in an event of a default under such debt obligations and a foreclosure and sale of our assets for an amount that is less than the outstanding debt.

The nature of our business requires the application of complex accounting rules, and any significant changes in current rules could affect our financial statements and results of operations.

The accounting rules and regulations that we must comply with are complex and are subject to interpretation by the FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. Recent actions and public comments from the FASB and SEC have focused on the integrity of financial reporting and internal controls over financial reporting. In addition, many companies’ accounting policies and practices are subject to heightened scrutiny by regulators and the public. A change in these principles or interpretations could have a significant effect on our reported results of operations and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which could negatively affect our results of operations.

If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

The preparation of our financial statements in conformity with United States generally accepted accounting principles (GAAP) requires management to make judgments, estimates and assumptions that affect the amounts reported in our unaudited condensed consolidated financial statements and related notes thereto. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock. Significant judgments, estimates and assumptions used in preparing our unaudited condensed consolidated financial statements include, or may in the future include, those related to revenue recognition, stock-based compensation expense including the estimation of grant date fair value of common stock, allowance for doubtful accounts, income taxes, goodwill and intangible assets.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), and the listing standards of the New York Stock Exchange (the NYSE). The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. We have expended, and anticipate that we will continue to expend, significant resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

Our current controls and any new controls that we develop may become inadequate because of changes in the conditions in our business, including increased complexity resulting from our international expansion. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely adversely affect the market price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. We are required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting.

72Additionally, our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting and may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could

internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely adversely affect the market price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. We are required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting.77

Additionally, our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting and may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have an adverse effect on our business, results of operations and financial condition and could cause a decline in the market price of our common stock.

Risks Related to Ownership of Our Common Stock

The market price of our common stock could be volatile, and you could lose all or part of your investment.

Technology stocks have historically experienced high levels of volatility. The market price of our common stock may fluctuate substantially depending on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following:

•the Merger, the pendency of the Merger, and the failure to complete the Merger may adversely affect our business, financial condition, operating results, and stock price;

•price and volume fluctuations in the overall stock market from time to time;

•announcements of new products, solutions or technologies, commercial relationships, acquisitions or other events by us or our competitors;

•changes in how enterprises perceive the benefits of our platform and products;

•departures of key personnel;

•the public’s reaction to our press releases, other public announcements and filings with the SEC;

•fluctuations in the trading volume of our shares or the size of our public float, including in connection with an acquisition or upon conversion of some or all of our outstanding Notes;

•sales of large blocks of our common stock;

•actual or anticipated changes or fluctuations in our results of operations;

•whether our results of operations meet the expectations of securities analysts or investors;

•changes in actual or future expectations of investors or securities analysts;

•actual or perceived significant data breach involving our platform;

•litigation involving us, our industry or both;

•governmental or regulatory actions or audits;

•regulatory developments in the United States, foreign countries or both;

•general economic conditions and trends;

•public health crises and related measures to protect the public health (such as the COVID-19

pandemic);

•major catastrophic events in our domestic and foreign markets; and

•“flash crashes,” “freeze flashes” or other glitches that disrupt trading on the securities exchange on which we are listed.

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, results of operations or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the trading price of a company’s securities, securities class action litigation has often been brought against that company. If the market price of our common stock is volatile, we may become the target of securities litigation. Securities litigation could result in substantial costs and divert our management’s attention and resources from our business. This could have an adverse effect on our business, results of operations and financial condition.

73Our directors, executive officers and holders of 5% or more of our common stock beneficially own approximately 44.0% of our common stock and are able to exert significant control over us, which limits your ability to influence the outcome of important transactions, including a change of control.

~~litigation.~~Our ~~Securities~~directors, ~~litigation~~executive ~~could~~officers ~~result~~and inholders ~~substantial~~of ~~costs~~5% ~~and~~or ~~divert~~more of our ~~management’s~~outstanding ~~attention~~common stock, and ~~resources~~their ~~from~~respective ~~our~~affiliates, ~~business.~~beneficially ~~This~~own, ~~could~~in ~~have~~the anaggregate, ~~adverse~~approximately ~~effect~~44.0% onof the shares of our ~~business~~outstanding common stock, ~~results~~based on the number of ~~operations~~shares outstanding as of August 20, 2021, and ~~financial~~are ~~condition~~able to exert significant control over us, which limits your ability to influence the outcome of important transactions, including a change of control. Further, entities affiliated with Sequoia Capital, collectively, are currently our largest stockholder and hold

Our directors, executive officers and holders of 5% or more of our common stock beneficially own approximately 41.4% of our common stock and are able to exert significant control over us, which limits your ability to influence the outcome of important transactions, including a change of control.78

~~Our directors, executive officers and holders of 5% or more of our outstanding common stock, and their respective affiliates, beneficially own, in the aggregate,~~ approximately 4120.43% of the shares of our outstanding common stock, based on the number of shares outstanding as of April 30, 2021. Further, entities affiliated with Sequoia Capital, collectively, are currently our largest stockholder and hold approximately 28.1% of the total voting power of our capital stock based on the number of shares outstanding as of ~~April 30~~August 20, 2021. As a result, our directors, executive officers and holders of 5% or more of our outstanding capital stock, and their respective affiliates, if acting together, will be able to determine or significantly influence all matters requiring stockholder approval, including the elections of directors, amendments of our organizational documents and approval of any merger, sale of assets or other major corporate transaction. These stockholders may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may delay, prevent or discourage acquisition proposals or other offers for our common stock that you may feel are in your best interest as a stockholder and ultimately could deprive you of an opportunity to receive a premium for your common stock as part of a sale of our company, which in turn might adversely affect the market price of our common stock.

Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.

The conversion of some or all of the Notes, including conversions upon effectiveness of the Merger, may dilute the ownership interests of our stockholders. Upon conversion of the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. Holders of the Notes may hedge their positions in the Notes by entering into short positions with respect to the underlying common stock. In addition, any anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

The capped call transactions may affect the value of the Notes and our common stock.

Concurrent with the issuance of the Notes, we entered into the Capped Calls with certain financial institutions, the option counterparties. The Capped Calls are generally expected to reduce the potential dilution upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount converted with respect to the Notes, as the case may be.

The option counterparties or their respective affiliates may modify their initial hedge positions by entering into or unwinding various derivatives contracts with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of Notes (and are likely to do so during any applicable observation period related to a conversion of the Notes, or following any repurchase of the Notes, as applicable, by us). This activity could cause or avoid an increase or a decrease in the market price of our common stock or the Notes.

In addition, if any such Capped Calls fails to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the market price and trading volume of our common stock could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If any of the analysts who cover us change their recommendation regarding our common stock adversely, provide more favorable relative recommendations about our competitors or publish inaccurate or unfavorable research about our business, the price of our securities could decline. If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets and demand for our securities could decrease, which could cause the price and trading volume of our common stock to decline.

Substantial future sales could depress the market price of our common stock.

The market price of our common stock could decline as a result of a large number of sales of shares of such stock in the market, and the perception that these sales could occur may also depress the market price of our common stock. Under our Amended and Restated Investor Rights Agreement dated as of February 25, 2019, as amended, certain stockholders can require us to register shares owned by them for public sale in the United States. In addition, we filed a registration statement to register shares reserved for future issuance under our equity compensation plans. As a result, subject to the satisfaction of applicable exercise periods, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding restricted stock units (RSU) awards are available for immediate resale in the United States in the open market.

common stock. Under our Amended and Restated Investor Rights Agreement dated as of February 25, 2019, as amended, certain stockholders can require us to register shares owned by them for public sale in the United States. In addition, we filed a registration statement to register shares reserved for future issuance under our equity compensation plans. As a result, subject to the satisfaction of applicable exercise periods, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding restricted stock units (RSU) awards are available for immediate resale in the United States in the open market.

Sales of our common stock may make it more difficult for us to sell equity and convertible securities in the future at a time and at a price that we deem appropriate. These sales also could cause the trading price of our common stock and the Notes to fall and make it more difficult for you to sell shares of our common stock or Notes.

We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, results of operations and financial condition.

As a public company, ~~and particularly now that~~ we ~~are no longer an “emerging growth company,” we~~ incur greater legal, accounting and other expenses than we incurred as a private company. For example, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), and the rules and regulations of the SEC and the listing standards of the NYSE. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. Compliance with these requirements has increased and will continue to increase our legal, accounting and financial compliance costs and increase demand on our systems, making some activities more time-consuming and costly. These rules and regulations make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers. We have incurred, and expect to incur ~~in the future~~, significant expenses and devote substantial management effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. In ~~that regard, we will need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. In~~ addition, as a public company, we may be subject to activism, including ~~shareholder~~stockholder activism, which can lead to substantial costs, distract management and impact the manner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information in filings required of a public company, our business and financial condition has become more visible, which may result in threatened or actual litigation, including by competitors. These increased costs and demands upon management could adversely affect our business, results of operations and financial condition.

Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the market price of our common stock and the Notes.

Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following:

•vacancies on our board of directors can only be filled by our board of directors and not by stockholders;

•our board of directors is classified into three classes of directors with staggered three-year terms;

•our stockholders can only take action at a meeting of stockholders and will not be able to take action by written consent for any matter;

•a special meeting of our stockholders may only be called by a majority of our board of directors, the chairperson of our board of directors, our Chief Executive Officer or our President;

•advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;

•our amended and restated certificate of incorporation does not provide for cumulative voting;

•our amended and restated certificate of incorporation allows stockholders to remove directors only for cause;

•certain provisions of our amended and restated certificate of incorporation require the approval of the holders of at least 66% of our then-outstanding common stock;

•authorize undesignated preferred stock, the terms of which may be established and shares of which may be issued by our board of directors, without further action by our stockholders; and

•certain litigation against us can only be brought in Delaware.

These provisions, alone or together, could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock or the Notes.

Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for the following types of actions and proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants. Our amended and restated bylaws also provide that the federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find the exclusive-forum provisions in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

You should not rely on an investment in our common stock to provide dividend income. We have never declared or paid cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to fund the development and growth of our business. In addition, the Wells Fargo Credit Facility contains, and any future credit facility or financing we obtain may contain, terms limiting the amount of dividends that may be declared or paid on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent upon our results of operations, financial condition, capital requirements, applicable contractual restrictions and such other factors as we may deem relevant. As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us, because technology companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

General Risk Factors

Unfavorable conditions in our industry or the economy more generally or reductions in information technology spending could limit our ability to grow our business and adversely affect our results of operations and financial condition.

Our results of operations may vary based on the impact of changes in our industry or the economy more generally on us or our customers. Our business and results of operations depend on demand for information technology generally and for experience management solutions in particular, which in turn is influenced by the scale of business that our customers are conducting. Weak economic conditions, either in the U.S. or internationally, including as a result of changes in gross domestic product growth, financial and credit market fluctuations, interest rates, political turmoil or civil unrest, natural catastrophes or conflicts, or wars, and public health crises, such as the COVID-19 pandemic, and related public health measures, could cause a decrease in business investments, including spending on information technology generally. To the extent that weak economic conditions cause our existing customers or potential customers to reduce their budget for experience management solutions or to perceive spending on such systems as discretionary, demand for our platform may be adversely affected. Moreover, customers and potential customers may require extended billing terms and other financial concessions, which would limit our ability to grow our business and adversely affect our business, results of operations and financial condition.

Our business is subject to the risks of earthquakes, fire, floods, public health crises and other natural catastrophes and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or other incidents or terrorism.

Our corporate headquarters are located in the San Francisco Bay Area and we operate or utilize data centers that are located in North America and Europe. Additionally, we rely on our network and third-party infrastructure, enterprise applications, internal technology systems and our website for our development, marketing, operational support, hosted services and sales activities. The west coast of the United States, where our corporate headquarters and many of our key operations are located, contains active earthquake zones and have been subject to numerous devastating wildfires and associated electrical blackouts. In the event of a catastrophic event, including a natural disaster such as an earthquake, hurricane, fire, flood, tsunami or tornado, or other catastrophic event such as power loss, telecommunications failure, software or hardware malfunction, cyber-attack, war, terrorist attack or incident of mass violence in the San Francisco Bay Area or elsewhere where our operations or data centers are located or where certain other systems and applications that we rely on are hosted, we may be unable to continue our operations and may endure significant system interruptions, reputational harm, delays in our application development, lengthy interruptions in our platform, breaches of data security and loss of critical data, all of which could have an adverse effect on our future results of operations. In addition, natural disasters, cyber-attacks, acts of terrorism, public health crises, such as pandemics and epidemics, or other catastrophic events could cause disruptions in our or our customers’ businesses, national economies or the world economy as a whole.

to numerous devastating wildfires and associated electrical blackouts. In the event of a catastrophic event, including a natural disaster such as an earthquake, hurricane, fire, flood, tsunami or tornado, or other catastrophic event such as power loss, telecommunications failure, software or hardware malfunction, cyber-attack, war, terrorist attack or incident of mass violence in the San Francisco Bay Area or elsewhere where our operations or data centers are located or where certain other systems and applications that we rely on are hosted, we may be unable to continue our operations and may endure significant system interruptions, reputational harm, delays in our application development, lengthy interruptions in our platform, breaches of data security and loss of critical data, all of which could have an adverse effect on our future results of operations. In addition, natural disasters, cyber-attacks, acts of terrorism, public health crises, such as pandemics and epidemics, or other catastrophic events could cause disruptions in our or our customers’ businesses, national economies or the world economy as a whole.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

None.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

EXHIBIT INDEX

Incorporation by Reference

ExhibitNumber

Description

Form

File No.

Exhibit Number

Filing Date with SEC

Filed or Furnished Herewith

2.1

Agreement and Plan of Merger, dated July 25, 2021, among Project Metal Parent, LLC, Project Metal Merger Sub, Inc. and Medallia, Inc.*

8-K

001-38982

2.1

July 27, 2021

10.1

Form of Voting Agreement, dated as of July 25, 2021, by and among Project Metal Parent, LLC, Medallia, Inc. and certain stockholders of Medallia, Inc.*

8-K

001-38982

10.1

July 27, 2021

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1†

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2†

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL. Instance Document

101.SCH

XBRL. Taxonomy Extension Schema Document

101.CAL

XBRL. Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL. Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL. Taxonomy Extension Label Linkbase Document

101.PRE

XBRL.Extension Presentation Linkbase Database

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

____________

+* ~~Indicates~~Schedules ~~management~~and ~~contract~~exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. Medallia will furnish supplementally a copy of any omitted schedule or ~~compensatory~~exhibit ~~plan~~to the SEC upon request. Medallia may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished.

† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Medallia, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MEDALLIA, INC.
Date: June 4, 2021	By:	/s/ Leslie J. Stretch
Date: September 3, 2021	By:	/s/ Leslie J. Stretch
		Leslie J. Stretch
		President and Chief Executive Officer(Principal Executive Officer)
Date: June 4, 2021		/s/ Roxanne M. Oulman
Date: September 3, 2021		/s/ Roxanne M. Oulman
		Roxanne M. Oulman
		Executive Vice President and Chief Financial Officer (Principal Financial and Chief Accounting Officer)

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Filing Compare · Medallia, Inc.