BOX INC

Note 1. Description of Business and Basis of Presentation

Description of Business

We were incorporated in the state of Washington in April 2005, and were reincorporated in the state of Delaware in March 2008. Box provides the leading ICM platform that enables organizations of all sizes to securely manage cloud content while allowing easy, secure access and sharing of this content from anywhere, on any device.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements are prepared in accordance with GAAP and include the consolidated accounts of Box, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Certain prior period amounts reported in our consolidated financial statements have been reclassified to conform to the current year presentation. Such reclassifications did not affect revenue, income from operations, or net income.

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ from these estimates. Such estimates include, but are not limited to, the fair value of acquired intangible assets, the useful lives of intangible assets, the incremental borrowing rate we use to determine our lease liabilities, and the valuation allowance of deferred income tax assets. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Segments

Our Chief Executive Officer is our chief operating decision maker (CODM). Our CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, we have asingle reporting segment and operating unit structure. As part of the review, our CODM uses consolidated net income to measure segment profit or loss. Our CODM does not evaluate segment performance using asset or liability information. Since we operate as asingle reporting segment and operating unit structure, financial segment information, including profit or loss information and significant segment expenses, can be found in the consolidated financial statements.

Revenue Recognition

We derive our revenue primarily from three sources: (1) subscription revenue, which is comprised of subscription fees from customers who have access to our content cloud platform which includes routine customer support; (2) revenue from customers purchasing our premier services package; and (3) revenue from professional services such as implementing best practice use cases, project management and implementation consulting services.

Revenue is recognized when control of these services is transferred to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those services.

We determine revenue recognition through the following steps:

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Identification of the contract, or contracts, with a customer

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Identification of the performance obligations in the contract

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Determination of the transaction price

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Allocation of the transaction price to the performance obligations in the contract

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Recognition of revenue as we satisfy a performance obligation

Subscription and Premier Services Revenues

We recognize revenue as we satisfy our performance obligations. Accordingly, due to our subscription model, we recognize revenue for our subscription and premier services ratably over the contract term.

We typically invoice our customers at the beginning of the term, in multi-year, annual, quarterly or monthly installments. Our subscription and premier services contracts generally range fromone tothree years in length, are typically non-cancellable and do not contain refund-type provisions. Revenue is presented net of sales and other taxes we collect on behalf of governmental authorities.

Professional Services

Professional services are generally billed on a fixed price basis, for which revenue is recognized over time based on the proportion performed.

Contracts with Multiple Performance Obligations

Our contracts can include multiple performance obligations which may consist of some or all of subscription services, premier services, and professional services. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration discounting practices, the size and volume of our transactions, the customer demographic, the geographic area where services are sold, price lists, our go-to-market strategy, historical standalone sales and contract prices.

Deferred Revenue

Deferred revenue consists of billings in advance of revenue recognition generated by our subscription services, premier services, and professional services described above.

Cost of revenue consists primarily of costs related to providing our subscription services to our paying customers, including employee compensation and related expenses for data center operations, customer support and professional services personnel, public cloud hosting costs, depreciation of servers and equipment, security services and other tools, as well as amortization expense associated with capitalized internally developed software and acquired technology. We allocate overhead such as rent, information technology costs and employee benefit costs to all departments based on headcount.

Deferred Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for new contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have estimated to befive years. We determined the period of benefit by taking into consideration the duration of our customer contracts, the life cycles of our technology and other factors. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in sales and marketing expenses on the consolidated statements of operations.

We deferred sales commissions costs of $52.0 million, $44.5 million and $55.0 million during the years ended January 31, 2025, 2024 and 2023, respectively, and amortized $52.5 million, $54.2 million and $53.5 million of deferred commissions during the same periods respectively.

Certain Risks and Concentrations

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed deposit insurance coverage limits.

We sell to a broad range of customers. Our revenue is derived primarily from the United States across a multitude of industries. Accounts receivable are derived from the delivery of our services to customers primarily located in the United States. We accept and settle our accounts receivable using credit cards, electronic payments and checks. A majority of our lower dollar value invoices are settled by credit card on or near the date of the invoice. We do not require collateral from customers to secure accounts receivable. We believe collections of our accounts receivable are probable based on the size, industry diversification, financial condition and past transaction history of our customers. As of January 31, 2025, two resellers, who are also customers, each accounted for more than 10% of total accounts receivable and as of January 31,2024, nosingle customer accounted for more than 10% of total accounts receivable. No single customer represented over 10% of revenue in the years ended January 31, 2025, 2024 and 2023.

We serve our customers and users from public cloud hosting operated by third parties. In order to reduce the risk of down time of our subscription services, we have public cloud hosting services established in various locations in the United States and abroad and we have internal procedures to restore services in the event of disaster. Even with these procedures for disaster recovery in place, our cloud services could be significantly interrupted during the implementation of the procedures to restore services.

Geographic Locations

For the years ended January 31, 2025, 2024 and 2023, revenue attributable to customers in the United States was 64%,66% and 67%, respectively. For the years ended January 31, 2025, 2024 and 2023 revenue attributable to customers in Japan was 23%,21% and 19%, respectively.

As of January 31, 2025 and 2024, substantially all of our property and equipment was located in the United States.

Foreign Currency Translation and Transactions

The functional currency of our principal foreign subsidiary is the U.S. dollar; for the other foreign subsidiaries, the functional currency is generally the local currency. Adjustments resulting from translating foreign functional currency financial statements of our foreign subsidiaries into U.S. dollars are recorded as part of a separate component of the consolidated statements of comprehensive income. Foreign currency transaction gains and losses are included within other expense, net, in the consolidated statements of operations for the period. Monetary assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average exchange rate during the period. Equity transactions are translated using historical exchange rates. Translation adjustments were $14.0 million and $10.3 million as of January 31, 2025 and 2024, respectively. We incurred $1.4 million, $3.0 million and $3.4 million in foreign currency exchange losses during the years ended January 31, 2025, 2024 and 2023, respectively.

Cash and Cash Equivalents

We consider all highly liquid investments with an initial maturity of 90 days or less at the date of purchase to be cash equivalents. We maintain such funds in overnight cash deposits, money market funds, and certificates of deposit.

Fair Value of Financial Instruments

We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We define fair value as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

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Level 1—Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

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Level 2—Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

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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. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

Short-Term Investments

Our short-term investments are primarily comprised of U.S. treasury securities, foreign government securities, and certificates of deposit. We determine the appropriate classification for our short-term investments at the time of purchase and reevaluate such designation at each balance sheet date. We have classified our short-term investments as available-for-sale securities as we may sell these securities at any time for use in operations or for other purposes. We record such securities at fair value in our consolidated balance sheet, with unrealized gains or losses reported as a component of accumulated other comprehensive loss. The amount of unrealized gains or losses reclassified into earnings is based on specific identification when the securities are sold. We periodically evaluate if any security has experienced credit-related declines in fair value, which are recorded against an allowance for credit losses with an offsetting entry to other expense, net on the consolidated statement of operations.

Derivative Instruments and Hedging

We measure derivative instruments at fair value and recognize them as either assets or liabilities on our consolidated balance sheets. We record changes in fair value of derivative instruments designated as cash flow hedges as a component of accumulated other comprehensive loss. When the hedged transaction affects earnings, we subsequently reclassify the net derivative gain or loss within other comprehensive loss into the same line as the hedged item on the consolidated statements of operations to offset the changes in the hedged transaction. Derivatives not designated as hedging instruments are adjusted to fair value through other expense, net, on our consolidated statements of operations in the period during which changes in fair value occur.

The cash flow effects related to derivative financial instruments designated as cash flow hedges are included within operating activities on our consolidated statements of cash flows.

Accounts Receivable and Related Allowance

Accounts receivable are recorded at the invoiced amounts and do not bear interest. We maintain an allowance for estimated credit losses inherent in our accounts receivable portfolio. We assess the collectability of the accounts by taking into consideration the aging of our trade receivables, historical experience, reasonable and supportable forecasts of future economic conditions, and management judgment. We write off trade receivables against the allowance when management determines a balance is uncollectible and no longer intends to actively pursue collection of the receivable.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, generally three tofive years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining lease term. Depreciation commences once the asset is ready to be placed in service. Construction in progress is primarily related to the construction or development of property and equipment which have not yet been placed in service for their intended use.

Leases

We determine whether an arrangement contains a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To determine whether a contract is or contains a lease, we consider all relevant facts and circumstances to assess whether the customer has both of the following:

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The right to obtain substantially all of the economic benefits from use of the identified asset

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The right to direct the use of the identified asset

We recognize lease liabilities and right-of-use assets at lease commencement. We measure lease liabilities based on the present value of lease payments over the lease term discounted using the rate implicit in the lease when that rate is readily determinable or our incremental borrowing rate. We estimate our incremental borrowing rate based on an analysis of publicly traded debt securities of companies with credit and financial profiles similar to our own and adjust our incremental borrowing rate to reflect the corresponding lease term. We do not include in the lease term options to extend or terminate the lease unless it is reasonably certain that we will exercise any such options. We account for the lease and non-lease components as a single lease component for all our leases.

We measure right-of-use assets based on the corresponding lease liabilities adjusted for (i) prepayments made to the lessor at or before the commencement date, (ii) initial direct costs we incur, and (iii) tenant incentives under the lease. We evaluate the recoverability of our right-of-use assets for possible impairment in accordance with our long-lived assets policy. We do not recognize right-of-use assets or lease liabilities for short-term leases, which have a lease term of twelve months or less, and recognize the associated lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

Operating leases are reflected in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on our consolidated balance sheets. Finance leases are included in property and equipment, net, finance lease liabilities, and other long-term liabilities on our consolidated balance sheets.

We begin recognizing rent expense when the lessor makes the underlying asset available to us. We recognize rent expense under our operating leases on a straight-line basis. For finance leases, we record interest expense on the lease liability in addition to amortizing the right-of-use asset (generally straight-line) over the shorter of the lease term or the useful life of the right-of-use asset. Variable lease payments are expensed as incurred and are not included within the lease liabilities and right-of-use assets calculation. We generally recognize sublease income on a straight-line basis over the sublease term.

Business Combinations

Weallocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but whichare inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Impairment Assessment of Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets

We evaluate the recoverability of property and equipment for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of property and equipment is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charges during the years presented.

Acquired finite-lived intangible assets are typically amortized over the estimated useful lives of the assets, which is generallytwo toseven years. We evaluate the recoverability of our intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any such impairment charges during the years presented.

We review goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. If we determine that it is more likely than not that its fair value is less than its carrying amount, then the quantitative goodwill impairment test will be performed. The quantitative goodwill impairment test identifies goodwill impairment and measures the amount of goodwill impairment loss to be recognized by comparing the fair value of our single reporting unit with its carrying amount. If the fair value exceeds its carrying amount, no further analysis is required; otherwise, any excess of the goodwill carrying amount over the implied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. No impairment of goodwill has been identified during the years presented.

Legal Contingencies

From time to time, we are subject to litigation and claims that arise in the ordinary course of business. We investigate litigation and claims as they arise and accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Because the results of litigation and claims cannot be predicted with certainty, we base our loss accruals on the best information available at the time. As additional information becomes available, we reassess our potential liability and may revise our estimates. Such revisions could have a material impact on future quarterly or annual results of operations.

Research and Development Costs

Research and development costs include personnel costs, including stock-based compensation expense, associated with our engineering personnel and consultants responsible for the design, development and testing of the product, and allocated overhead for facilities, information technology, and employee benefit costs.

Internal-Use Software Costs

We capitalize costs to develop software for internal use incurred during the application development stage. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Once an application has reached the development stage, qualifying internal and external costs are capitalized until the application is substantially complete and ready for its intended use. Capitalized qualifying costs are amortized on a straight-line basis when the software is ready for its intended use over an estimated useful life, which is generally three years. Internal-use software costs also include third-party on-premises software, which is amortized over the lesserof five years or the license term. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

We capitalize qualifying implementation costs incurred in a hosting arrangement that is a service contract based on the existing guidance for internally developed software, which is presented as part of our prepaid expenses and other current assets and other long-term assets based on the term of the associated hosting arrangement. Qualifying external and internal costs incurred during the application development stage of implementation are capitalized and costs incurred during the preliminary project and post implementation stages are expensed as incurred. We amortize capitalized qualifying implementation costs on a straight-line basis when the module or component of the hosting arrangement is ready for its intended use over the shorter of (i) the contract term plus the renewal period and (ii) three years. The amortization of capitalized qualifying implementation costs is presented in the same line item as fees for the associated hosting arrangement in the consolidated statements of operations. We test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Advertising Costs

Advertising costs are expensed as incurred and are included in sales and marketing expense. Advertising costs for the years ended January 31, 2025, 2024 and 2023 were $27.1 million, $17.5 million and $14.7 million, respectively.

Stock-Based Compensation

We determine the fair value of stock options and purchase rights issued to employees under our 2015 Equity Incentive Plan (2015 Plan) and 2015 Employee Stock Purchase Plan (2015 ESPP) on the date of grant using the Black-Scholes option pricing model, which is impacted by the fair value of our common stock as well as changes in assumptions regarding a number of variables, which include, but are not limited to, the expected common stock price volatility over the term of the awards, the expected term of the awards, risk-free interest rates and the expected dividend yield. We use the market closing price of our Class A common stock as reported on the New York Stock Exchange for the fair value of restricted stock units granted after our initial public offering (IPO).

We recognize compensation expense for stock options and restricted stock units, net of estimated forfeitures, on a straight-line basis over the period during which an employee is required to provide services in exchange for the award (generally the vesting period of the award). We estimate future forfeitures at the date of grant and revise the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We recognize compensation expense of purchase rights granted under our 2015 ESPP on a straight-line basis over the offering period.

For performance-based restricted stock units that vest based upon continued service and achievement of certain performance conditions established by the Board of Directors for a predetermined period, the fair value is determined based upon the market closing price of our Class A common stock on the date of the grant; compensation expense is recognized over the requisite service period if it is probable that the performance condition will be satisfied based on the accelerated attribution method.

For market-based restricted stock units that vest based upon continued service and achievement of certain market conditions established by the Board of Directors for a predetermined period, the fair value is determined using a Monte Carlo simulation model. The Monte Carlo simulation model requires the use of various assumptions, including the stock price volatility and risk-free interest rate as of the valuation date corresponding to the length of time remaining in the performance period. Compensation expense is recognized over the requisite service period based on the accelerated attribution method.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the temporary differences between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in income tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts we believe are more likely than not to be realized.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

The 2017 Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on global intangible low-taxed income (GILTI) earned by foreign subsidiaries. We elected to account for the income tax effects of GILTI as a period cost in the year the tax is incurred.

Recently Adopted and Issued Accounting Pronouncements

In November 2024, the FASB issued Accounting Standard Update (ASU) 2024-04, Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This ASU is effective for fiscal years beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. We early adopted the new standard, effective November 1, 2024, on a prospective basis. The adoption didnot have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about the types of expenses (including employee compensation, depreciation, and amortization) in commonly presented expense captions in the statement of operations. For interim and annual reporting periods, entities will be required to provide this information in tabular format in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of the new standard on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires greater disaggregation of tax information in rate reconciliation and income taxes paid by jurisdiction. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of the new standard on our consolidated financial statement disclosures.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application to all prior periods presented in the financial statements. Weadopted the new standard for the year ended January 31, 2025 and have disclosed the incremental segment information in Note 2.

There were no other recently adopted or issued accounting pronouncements that had a material impact on our consolidated financial statements for the year ended January 31, 2025.

Note 3. Revenue

Deferred Revenue

Deferred revenue was $608.6 million and $586.9 million as of January 31, 2025 and 2024, respectively. During the years ended January 31, 2025 and 2024, we recognized $568.3 million and $546.4 million of revenue that was included in the deferred revenue balance as of January 31,2024 and 2023, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of January 31, 2025, we had remaining performance obligations from contracts with customers of $1.5 billion. We expect to recognize revenue on approximately 56% and 25% of these remaining performance obligations over the next 12 and 24 months, respectively, with the balance recognized thereafter.

Note 4. Fair Value of Financial Instruments

Fair Value Measurements of Assets and Liabilities Measured at Fair Value on a Recurring Basis

We measure our financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We define fair value as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

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Level 1—Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

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Level 2—Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

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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. These inputs are based on our own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

The estimated fair value of securities included in cash equivalents and short-term investments, which are classified as Level 1, were as follows (in thousands):

(1)

Asof January 31, 2024, we had a certificate of deposit for a total of $30.0 million with an original maturity of more than three months and less than twelve months that is classified as a short-term investment in our consolidated balance sheet. This certificate of deposit is not included in the table above as it does not meet the definition of a security.

There were no material differences between the estimated fair value and amortized cost of our securities included in cash equivalents and short-term investments.

As of January 31, 2025, contractual maturities of our securities included in cash equivalents and short-term investments were as follows (in thousands):

As of January 31, 2025, we do not consider any portion of the unrealized losses to be credit losses.

Fair Value Measurements of Other Financial Instruments

In September 2024, we issued $460.0 million aggregate principal amount of 1.50% convertible senior notes due September 15, 2029. In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. Using the proceeds from the issuance of the 2029 Convertible Notes, we entered into separate and privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $140.0 million aggregate principal amount of the 2026 Convertible Notes, which were completed simultaneously with the new convertible debt offering. The estimated fair values of the Convertible Notes, which we have classified as Level 2 financial instruments, were determined using observable market prices. As of January 31, 2025, the estimated fair value of the 2029 Convertible Notes and 2026 Convertible Notes was$458.1 million and$260.2 million, respectively, and as of January 31, 2024, the estimated fair value of the 2026 Convertible Notes was $392.1 million.

During the year ended January 31, 2025, we entered into foreign currency forward contracts to hedge monetary assets and liabilities denominated in non-functional currencies. These foreign currency forward contracts have maturities of 12 months or less. As of January 31, 2025, we had foreign currency forward contracts not designated as hedging instruments with a total notional value of $67.6 million, and as of January 31, 2024, we didnot have foreign currency forward contracts. Our foreign currency forward contracts are classified as Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates. As of January 31, 2025, the gross fair value of these foreign currency forward contracts, recognized in other current assets in the consolidated balance sheet, wasnot material. The gains and losses recognized for these foreign currency forward contracts werenot material during the year ended January 31, 2025.

Note 5. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Depreciation expense related to property and equipment was $8.2 million, $37.0 million and $51.2 million for the years ended January 31, 2025, 2024 and 2023, respectively.

Note 6. Leases

We have entered into various non-cancellable operating lease agreements for certain of our offices and data centers with lease periods expiring primarily between fiscal years 2026 and 2034. Certain of these arrangements have free or escalating rent payment provisions and optional renewal or termination clauses. Our operating leases typically include variable lease payments, which are primarily comprised of common area maintenance and utility charges for our offices and power and network connections for our data centers, that are determined based on actual consumption. Our operating lease agreements do not contain any residual value guarantees, covenants, or other restrictions.

Wehave also entered into various finance lease arrangements to obtain servers and related equipment for our data center operations. These agreements are primarily forfour years and certain of these arrangements have optional renewal or termination clauses. The leases are secured by the underlying leased servers and related equipment. During fiscal year 2023, we modified our finance leases to reflect our intent to exercise the purchase options at the end of the term of each finance lease. As of January 31, 2024, there wereno remaining material finance lease liabilities.

We sublease certain floors of our Redwood City and London offices. Our current subleases have total lease terms ranging from 13 to 39 months that will expire at various dates by fiscal year 2029.

The components of lease cost, which were included in operating expenses in our consolidated statements of operations, were as follows (in thousands):

Supplemental cash flow information related to leases was as follows (in thousands):

The weighted-average remaining term of operating leases was 4.0 years and 4.79 years as of January 31, 2025 and 2024, respectively. The weighted-average discount rate used to measure the present value of our operating lease liabilities was 6.03% and 5.95% as of January 31, 2025 and 2024, respectively.

As of January 31, 2025, maturities of our operating lease liabilities, which do not include short-term leases and variable lease payments, are as follows (in thousands):

(1)

Non-cancellable sublease proceeds for the years ending January 31, 2026, 2027, 2028 and 2029 of $2.6 million, $2.1 million, $2.2 million, and $0.6 million, respectively, are not included in the table above.

As of January 31, 2025, we hadone operating lease for an office space that has not yet commenced. This operating lease has aggregated undiscounted future payments of $19.1 million and a lease term ofnine years. This operating lease is estimated to commence during fiscal year 2026.

Note 7. Intangible Assets

Intangible assets are included in other long-term assets in the consolidated balance sheets. Intangible assets consisted of the following (in thousands):

Intangible assets are amortized on a straight-line basis over the useful life. Amortization expense for intangible assets was $17.1 million, $16.6 million, and $17.7 million for the years ending January 31, 2025, 2024, and 2023, respectively.

As of January 31, 2025, expected amortization expense for intangible assets was as follows (in thousands):

As of January 31, 2025, we capitalized internally developed software of $37.2 million for numerous projects that were not yet ready for their intended use. The majority of these projects, which generally have a useful life ofthree years, are expected to commence amortization in fiscal year 2026.

Note 8. Commitments and Contingencies

Letters of Credit

As of January 31, 2025 and 2024, we had letters of credit in the aggregate amount of $11.2 million and $11.4 million, respectively, in connection with our operating leases and voluntary disability insurance (VDI) program, which were primarily issued under the available sublimit for the issuance of letters of credit in conjunction with a secured credit agreement as disclosed in Note 9.

Purchase Obligations

Our purchase obligations relate primarily to public cloud hosting services and IT software and support services costs and have terms ranging fromtwo toeight years. As of January 31, 2025, future minimum payments under non-cancellable contractual purchases, which were not recognized on our consolidated balance sheet, are as follows, shown in accordance with the payment due date (in thousands):

Legal Matters

From time to time, we are subject to litigation and claims that arise in the ordinary course of business. We investigate litigation and claims as they arise and accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Although the results of litigation and claims cannot be predicted with certainty, we believe there was not at least a reasonable possibility that we had incurred a material loss with respect to such loss contingencies as of January 31, 2025.

Indemnification

We include service level commitments to our customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those levels. In addition, our customer contracts often include (i) specific obligations that we maintain the availability of the customer’s data through our service and that we secure customer content against unauthorized access or loss, and (ii) indemnity provisions whereby we indemnify our customers for third-party claims asserted against them that result from our failure to maintain the availability of their content or securing the same from unauthorized access or loss. To date, we have not incurred any material costs as a result of such commitments.

Our arrangements generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any material costs as a result of such obligations and have not accrued any material liabilities related to such obligations in the consolidated financial statements. In addition, we indemnify our officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, there have been no claims under any indemnification provisions.

Note 9. Debt

Convertible Senior Notes

2029 Convertible Notes

In September 2024, we issued $460.0 million aggregate principal amount of 1.50% convertible senior notes due September 15, 2029. The 2029 Convertible Notes are senior unsecured obligations and bear interest at a rate of 1.50% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025. Each $1,000 principal amount of the 2029 Convertible Notes will be convertible into 23.0102 shares of our Class A common stock, which is equivalent to a conversion price of approximately $43.46 per share, subject to adjustment upon the occurrence of specified events.

The 2029 Convertible Notes are convertible at the option of the holders of the 2029 Convertible Notes at any time prior to the close of business on the business day immediately preceding June 15, 2029, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2025 (and only during such fiscal quarter), if the last reported sale price of our Class A 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 on each applicable trading day; (2) during thefive-business day period after anyfive consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2029 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate for the 2029 Convertible Notes on each such trading day; (3) if we call the 2029 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

On or after June 15, 2029, holders of the 2029 Convertible Notes may convert all or any portion of the 2029 Convertible Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Upon conversion, we will satisfy our conversion obligation by paying cash up to the aggregate principal amount of the 2029 Convertible Notes to be converted and we will pay or deliver, as the case may be, the conversion premium in cash, shares of common stock or a combination of cash and shares of common stock, at our election.

We may not redeem the 2029 Convertible Notes prior to September 20, 2027. We may redeem for cash all or any portion of the 2029 Convertible Notes, at our option, on or after September 20, 2027, if the last reported sale price of our 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 we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2029 Convertible Notes, which means we are not required to redeem or retire the 2029 Convertible Notes periodically.

Upon the occurrence of a fundamental change (as defined in the indenture governing the 2029 Convertible Notes) prior to the maturity date, subject to certain conditions, holders of the 2029 Convertible Notes may require us to repurchase all or a portion of the 2029 Convertible Notes for cash at a repurchase price equal to 100% of the principal amount of the 2029 Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

2026 Convertible Notes

In January 2021, we issued $345.0 million aggregate principal amount of 0.00% convertible senior notes due January 15, 2026. The 2026 Convertible Notes are senior unsecured obligations and do not bear regular interest. Each $1,000 principal amount of the 2026 Convertible Notes will be convertible into 38.7962 shares of our Class A common stock, which is equivalent to a conversion price of approximately $25.78 per share.

The 2026 Convertible Notes are convertible at the option of the holders of the 2026 Convertible Notes at any time prior to the close of business on the business day immediately preceding October 15, 2025, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2021 (and only during such fiscal quarter), if the last reported sale price of our Class A 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 on each applicable trading day; (2) during the measurement period in which the trading price per $1,000 principal amount of the 2026 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate for the 2026 Convertible Notes on each such trading day; (3) if we call the 2026 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

On or after October 15, 2025, holders of the 2026 Convertible Notes may convert all or any portion of their 2026 Convertible Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Effective February 5, 2021, we have made an irrevocable election to settle the principal portion of the 2026 Convertible Notes only in cash. Accordingly, upon conversion, we will pay the principal portion in cash and we will pay or deliver, as the case may be, the conversion premium in cash, shares of common stock or a combination of cash and shares of common stock, at our election.

We may redeem for cash all or any portion of the 2026 Convertible Notes, at our option, if the last reported sale price of our 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 we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Convertible Notes to be redeemed, plus any accrued and unpaid special interest to, but excluding the redemption date.

Upon the occurrence of a fundamental change (as defined in the indenture governing the 2026 Convertible Notes) prior to the maturity date, subject to certain conditions, holders of the 2026 Convertible Notes may require us to repurchase all or a portion of the 2026 Convertible Notes for cash at a repurchase price equal to 100% of the principal amount of the 2026 Convertible Notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.

In September 2024, using proceeds from the issuance of the 2029 Convertible Notes, we entered into separate and privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $140.0 million aggregate principal amount of the 2026 Convertible Notes for an aggregate amount of $191.7 million of cash. The repurchase was accounted for as an induced conversion. We recognized $10.1 million of induced conversion expense, representing the fair value of the consideration paid to certain holders of the 2026 Convertible Notes in excess of the value to which they were entitled to receive pursuant to the original conversion terms. This expense was recognized in other expense, net on our consolidated statements of operations. The remaining consideration of $42.6 million, after accounting for the induced conversion expense and carrying value of the 2026 Convertible Notes on the date of repurchase, including unamortized debt issuance costs of $1.0 million, was recorded as a reduction to additional paid-in capital.

As of January 31, 2025, the conditions allowing holders of the Convertible Notes to convert were not met.

The net carrying amount of the Convertible Notes consisted of the following (in thousands):

Issuance costs are being amortized to interest expense over the term of the Convertible Notes using the effective interest rate method. The effective interest rate used to amortize the issuance costs of the 2029 Convertible Notes and 2026 Convertible Notes is 2.06% and 0.56%, respectively. For the years ended January 31, 2025, 2024, and 2023, interest expense related to the 2029 Convertible Notes and 2026 Convertible Notes was not material.

Capped Calls

In connection with the pricing of the 2029 Convertible Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2029 Capped Calls”). The 2029 Capped Calls each have a strike price of approximately $43.46 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2029 Convertible Notes. The 2029 Capped Calls have initial cap prices of $66.86 per share, subject to certain adjustments. The 2029 Capped Calls cover, subject to anti-dilution adjustments, approximately 10.6 million shares of our Class A common stock. The cost of $52.5 million incurred in connection with the 2029 Capped Calls was recorded as a reduction to additional paid-in capital.

In connection with the pricing of the 2026 Convertible Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls” and together with the 2029 Capped Calls, the “Capped Calls”). The 2026 Capped Calls each have a strike price of approximately $25.80 per share, subject to certain adjustments, which correspond to the initial conversion price of the 2026 Convertible Notes. The 2026 Capped Calls have initial cap prices of $35.58 per share, subject to certain adjustments. The 2026 Capped Calls cover, subject to anti-dilution adjustments, approximately 13.4 million shares of our Class A common stock. The cost of $27.8 million incurred in connection with the 2026 Capped Calls was recorded as a reduction to additional paid-in capital. In September 2024, in connection with the repurchase of the 2026 Convertible Notes, we entered into agreements to unwind a portion of the 2026 Capped Calls and received approximately $30.3 million, which was recorded as an increase to additional paid-in capital. Apart from the partial unwind agreements, there have been no changes to the condition of the 2026 Capped Calls.

The Capped Calls are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the Convertible Notes (or, in the event a conversion of the Convertible Notes is settled in cash, to offset our cash payment obligation) with such reduction or offset, as the case may be, subject to a cap based on the cap price. The Capped Calls are separate transactions, and not part of the terms of the Convertible Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ deficit and are not accounted for as derivatives.

Line of Credit

On June 30, 2023, we entered into an amended and restated credit agreement and on December 19, 2024, we entered into Amendment No. 1 to the June 2023 Facility. The amendment, among other changes, (a) decreases the revolving commitments from $150.0 million to $75.0 million and (b) amends the conditions that prevent early maturity of the revolving loan facility so that the maturity date is the earlier of (i) June 30, 2028, (ii) October 16, 2025, except to the extent that our liquidity (as determined in accordance with the June 2023 Facility) is greater than or equal to the outstanding principal amount of our existing 2026 Convertible Notes as of such date, and (iii) February 11, 2028, only in the event that any of our Series A Convertible Preferred Stock remains outstanding as of such date.

The revolving loans accruing interest at a rate per annum equal to, at our option, (a) an adjusted term Secured Overnight Financing Rate (SOFR) (based on one, three, or six-month interest periods) plus a margin ranging from 1.35% to 1.85%, (b) a daily simple SOFR rate plus a margin ranging from 1.35% to 1.85%, or (c) a prime rate plus a margin of 0.35% to 0.85%. The June 2023 Facility provides for a commitment fee of 0.15% to 0.25% per annum, determined based upon our senior secured leverage ratio, on the average daily unused amount of the revolving committed amount, payable quarterly in arrears. Borrowings under the June 2023 Facility are collateralized by substantially all of our assets. The June 2023 Facility requires us to comply with a maximum leverage ratio and a minimum liquidity requirement. Additionally, the June 2023 Facility contains customary affirmative and negative covenants.

In September 2024, we paid down $30.0 million of our outstanding principal balance on the June 2023 Facility. As of January 31, 2025, we hadno debt outstanding on the June 2023 Facility and were in compliance with all financial covenants.

Note 10. Redeemable Convertible Preferred Stock and Stockholders’ Deficit

Common Stock

The holder of each share of Class A common stock is entitled to 1 vote per share. As of January 31, 2025 and 2024, we had authorized 1,000,000,000 shares of Class A common stock, par value of $0.0001 per share.144,112,756 and 144,353,060 shares of Class A common stock were issued and outstanding as of January 31, 2025 and 2024, respectively.

Preferred Stock

As of January 31, 2025 and 2024, we had authorized 100,000,000 shares of undesignated preferred stock, par value of $0.0001 per share.500,000 shares of Series A Convertible Preferred Stock were issued and outstanding as of January 31, 2025 and 2024.

Treasury Stock

As of January 31, 2025 and 2024, we held an aggregate of 3,107,809 shares of common stock as treasury stock.

Series A Convertible Preferred Stock

On April 7, 2021, we entered into an Investment Agreement with KKR relating to the issuance and sale of 500,000 shares of our Series A Convertible Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $500 million, or $1,000 per share. The closing of the Issuance occurred on May 12, 2021 (the “Closing Date”).

The Series A Preferred Stock rank senior to our Class A common stock with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of Box. The Series A Preferred Stock initially have a liquidation preference of $1,000 per share. Holders of the Series A Preferred Stock are entitled to a cumulative dividend (the “Dividend”) at the rate of 3.0% per annum, compounding quarterly, paid-in-kind or paid in cash, at our election. For any quarter in which we elect not to pay the Dividend in cash with respect to a share of Series A Preferred Stock, such Dividend will become part of the liquidation preference of such share, as set forth in the Certificate of Designations designating the Series A Preferred Stock (the “Certificate of Designations”).

The Series A Preferred Stock is convertible at the option of the holders thereof at any time into shares of Class A common stock at an initial conversion price of $27.00 per share. At any time after the third anniversary of the Closing Date, if the volume weighted average price of our Class A common stock exceeds 200% of the conversion price set forth in the Certificate of Designations, for at least 20 trading days in any period of 30 consecutive trading days, including the last day of such trading period, at our election, all of the Series A Preferred Stock will be convertible into the applicable number of shares of Class A common stock.

Holders of the Series A Preferred Stock are entitled to vote with the holders of our Class A common stock on an as-converted basis. Holders of the Series A Preferred Stock are entitled to a separate class vote with respect to, among other things, amendments to our organizational documents that have an adverse effect on the Series A Preferred Stock, authorizations or issuances by us of securities that are senior to, or equal in priority with, the Series A Preferred Stock, increases or decreases in the number of authorized shares of Series A Preferred Stock, and payments of special dividends in excess of an agreed upon amount.

At any time following the fifth anniversary of the Closing Date, we may redeem some or all of the Series A Preferred Stock for a per share amount in cash equal to: (i) the sum of (x)100% of the then-current liquidation preference thereof, plus (y) all accrued and unpaid dividends, multiplied by (ii) (A)105%if the redemption occurs atany time on or after the fifth anniversary of the Closing Date and prior to the sixth anniversary of the Closing Date, (B)102% if the redemption occurs at any time on or after the sixth anniversary of the Closing Date and prior to the seventh anniversary of the Closing Date, and (C)100% if the redemption occurs at any time on or after the seventh anniversary of the Closing Date.

At any time following the seventh anniversary of the Closing Date, each holder of the Series A Preferred Stock will have the right to cause us to redeem, ratably, in whole or, from time to time, in part, the shares of Series A Preferred Stock held by such holder for a per share amount in cash equal to the sum of (x)100% of the then-current liquidation preference thereof, plus (y) all accrued and unpaid dividends.

Upon prior written notice of certain change of control events involving Box, the shares of the Series A Preferred Stock shall automatically be redeemed by us for a repurchase price equal to the greater of (i) the value of the shares of Series A Preferred Stock as converted into Class A common stock at the then-current conversion price and (ii) an amount in cash equal to 100% of the then-current liquidation preference thereof plus all accrued but unpaid dividends. In the case of clause (ii) above, we will also be required to pay the holders of the Series A Preferred Stock a “make-whole” premium consisting of dividends that would have otherwise accrued from the effective date of such change of control through the fifth anniversary of the Closing Date.

Pursuant to the Investment Agreement, we agreed to increase the size of our Board of Directors in order to appoint, as of the Closing Date, one individual designated by KKR to our Board of Directors for a term expiring at the 2023 annual meeting of our stockholders. So long as KKR beneficially owns at least 50% of the shares of Series A Preferred Stock purchased by KKR at the closing of the Issuance on an as-converted basis, KKR will have the right to designate a director nominee for election to our Board of Directors.

We have applied the guidance in ASC 480‑10‑S99‑3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities and have therefore classified the Series A Preferred Stock as mezzanine equity. The Series A Preferred Stock was recorded outside of stockholders’ deficit because the shares may be redeemed at the option of the holders and that redemption option is not solely within our control. Upon issuance, we recorded the Series A Preferred Stock, net of issuance costs. We have elected to accrete the issuance costs through the date the shares can first be redeemed at the option of the holders, which is the seventh anniversary of the Closing Date using the effective interest rate method. During the years ended January 31, 2025 and 2024, accretion recognized was not material.

During the years ended January 31, 2025 and 2024, we paid cash dividends to our Series A Preferred Stockholders in the amount of $15.0 million in both periods. As of January 31, 2025, we had accrued dividends of $1.3 million on the Series A Preferred Stock. Accrued dividends are recorded against additional paid-in capital due to our accumulated deficit.

Share Repurchase Plan

Our Board of Directors has authorized a share repurchase plan to opportunistically repurchase shares of our outstanding Class A common stock in open market transactions. We periodically enter into pre-set trading plans adopted in accordance with Rule 10b5-1 to effect repurchases under our share repurchase plan.

During the year ended January 31, 2025, we repurchased 7.6 million shares at a weighted average price of $27.90 per share for a total amount of $211.5 million. During the year ended January 31, 2024, we repurchased 6.6 million shares at a weighted average price of $27.01 for a total amount of $177.0 million. As of January 31, 2025, $52.0 million remained authorized and available for additional repurchases.

On March 4, 2025, we announced that our Board of Directors authorized an expansion of the share repurchase plan. Under this expansion, an additional $150 million of our class A common stock may be repurchased in open market transactions through March 3, 2026.

Note 11. Stock-Based Compensation

Employee Equity Plans

In January 2015, our Board of Directors adopted the 2015 Plan, which became effective prior to the completion of our IPO. Awards granted under the 2015 Plan may be (i) incentive stock options, (ii) nonstatutory stock options, (iii) restricted stock units, (iv) restricted stock awards or (v) stock appreciation rights, as determined by our Board of Directors at the time of grant. Generally, our restricted stock units vest over four years and, (a) for employee new hire restricted stock unit grants, twenty-five percent vest one year from the vesting commencement date and continue to vest 1/16th per quarter thereafter; or (b) for employee refresh restricted stock unit grants,1/16 th per quarter vest from the vesting commencement date. On July 2, 2024, our stockholders approved the amended and restated 2015 Plan. Subject to the adjustment provisions, the maximum number of shares that may be issued under the 2015 Plan is (a)9,000,000 shares of our Class A common stock, plus (b) any shares subject to awards granted under our 2011 Equity Incentive Plan, as amended, and the 2015 Plan that were outstanding on or prior to the approval of the amended and restated 2015 Plan, and that subsequently expire, are forfeited to or repurchased, or otherwise terminate without having been exercised or issued in full, up to a maximum of 20,228,040 shares. As of January 31, 2025,8,594,162 shares were reserved for future issuance under the 2015 Plan.

In January 2015, our Board of Directors adopted the 2015 ESPP, which became effective prior to the completion of our IPO. The 2015 ESPP allows eligible employees to purchase shares of our Class A common stock at a discount of up to 15% through payroll deductions of their eligible compensation, subject to any plan limitations. The 2015 ESPP provides for 24-month offering periods beginning March 16 and September 16 of each year, and each offering period consists of four six-month purchase periods.

On each purchase date, eligible employees may purchase our stock at a price per share equal to 85% of the lesser of (1) the fair market value of our stock on the offering date or (2) the fair market value of our stock on the purchase date. In the event the price is lower on the last day of any purchase price period, in addition to using that price as the basis for that purchase period, the offering period resets and the new lower price becomes the new offering price for a new 24 month offering period. As of January 31, 2025,2,823,385 shares were reserved for future issuance under the 2015 ESPP.

Stock Options

The following table summarizes the stock option activity under the equity incentive plans and related information:

Shares Subject to Options Outstanding Weighted-Average Weighted-Remaining Average Exercise Contractual Life Aggregate Shares Price (Years) Intrinsic Value (in thousands) Balance as of January 31, 2019 Options granted Option exercised Options forfeited/cancelled Balance as of January 31, 2020 Options granted Option exercised Options forfeited/cancelled Balance as of January 31, 2021 Vested and expected to vest as of January 31, 2021 Exercisable as of January 31, 2021 9,096,961 $9.01 4.97 $ 108,731 577,082 19.89 (659,34) 9.05 (242,110) 17.63 8,772,585 $ 9.48 4.27 $ 60,221 31,666 12.48 (1,994,667) 5.14 (192,547) 10.73 6,617,037 $ 10.773.77 $ 48,098 6,554,892 $ 10.68 3.74 $ 48,092 5,348,780 $ 8.59 2.87 $ 47,974

The aggregate intrinsic value of exercisable options as of January 31, 2025 is calculated based on the difference between the exercise price and the current fair value of our common stock. The aggregate intrinsic value of exercised options for the years ended January 31, 2025, 2024 and 2023 was $14.8 million, $1.6 million, and $60.0 million, respectively. During the year ended January 31, 2025, we realized $2.2 million in tax benefits in connection with the stock options exercised. The tax benefits realized in connection with stock option exercises during the years ended January 31, 2024 and 2023 were not material. The aggregate estimated fair value of stock options granted to employees that vested during the years ended January 31, 2024 and 2023 wasnot material. No stock options vested during the year ended January 31, 2025 and there wereno options granted to employees during the years ended January 31, 2025, 2024 and 2023.

Restricted Stock Units

The following table summarizes the restricted stock unit activity, inclusive of performance-based and market-based restricted stock units, under the equity incentive plans and related information:

er of Weighted- Restricted Average Stock Units Grant Date Outstanding Fair Value Unvested balance - January 31, 2019 18,098,707 $ 19.35 Granted 12,436,586 18.81 Vested, net of shares withheld for employee payroll taxes (4,166,907 ) 19.92 Forfeited/cancelled (4,560,279 ) 19.77 Unvested balance - January 31, 2020 21,808,107 $ 18.85 Granted 10,702,574 15.82 Vested, net of shares withheld for employee payroll taxes (5,100,239 ) 18.28 Forfeited/cancelled (13,079,764 ) 17.87 Unvested balance - January 31, 2021 14,330,678 $ 17.68

The total fair value of vested restricted stock units for the years ended January 31, 2025, 2024 and 2023 was $226.9 million, $214.6 million, and $215.3 million. During the year ended January 31, 2025, we realized $42.1 million in tax benefits in connection with the vesting and issuance of restricted stock units. The tax benefits realized in connection with the vesting and issuance of restricted stock units during the years ended January 31, 2024 and 2023 were not material. As of January 31, 2025, there was $370.7 million of unrecognized stock-based compensation expense related to outstanding restricted stock units, inclusive of performance-based and market-based restricted stock units, granted to employees that is expected to be recognized over a weighted-average period of 2.56 years.

Executive Bonus Plan

We use performance-based incentives for certain employees, including our named executive officers, to achieve our annual financial and operational objectives, while making progress towards our longer-term strategic and growth goals (the "Executive Bonus Plan"). Based on a review of our actual achievement of the pre-established corporate financial objectives and additional inputs from our Compensation Committee, the Executive Bonus Plan for fiscal year 2024 was determined, settled and paid out in the first quarter of fiscal year 2025 in the form of cash and fully vested restricted stock units. During the first quarter of fiscal year 2025, our Compensation Committee also adopted and approved the performance criteria and targets for the Executive Bonus Plan for fiscal year 2025, which is expected to be paid out in the form of cash and fully vested restricted stock units in the first quarter of fiscal year 2026.

During the years ended January 31, 2025 and 2024, we recognized stock-based compensation expense related to Executive Bonus Plans in the amount of $13.4 million and $6.2 million, respectively. The unrecognized compensation expense related to the ungranted and unvested Executive Bonus Plan for fiscal year 2025 is $3.1 million, based on the expected performance against the pre-established corporate financial objectives as of January 31, 2025, which is expected to be recognized during the first quarter of fiscal year 2026.

Performance-Based and Market-Based Restricted Stock Units

During the years ended January 31, 2025, 2024 and 2023, we granted performance-based restricted stock units to our named executive officers. The performance-based restricted stock units are subject to vesting based on the achievement of both performance-based and service-based conditions. The performance-based restricted stock units vest annually over a period ofthree years from the date of grant, subject to the executive's continued employment. The number of shares that can be earned ranges from 0% to 150% of the target number of shares granted based on the relative performance of the company compared to the specific performance metrics. In order to vest, the performance condition is only required to be met in the first year following the grant date.

In December 2024, we granted 600,000 market-based restricted stock units, subject to vesting based on the achievement of both market-based and service-based conditions. The market-based restricted stock units are eligible to vest based on the achievement of stock price goals over a performance period that ends on the fourth anniversary of the grant date. The total number of market-based restricted stock units is divided into three equal tranches with each tranche subject to both a stock price goal and a minimum service requirement.

The $20.59 average grant date fair value per market-based restricted stock unit was determined using a Monte Carlo simulation model and stock-based compensation expense is recognized over the requisite service period based on the accelerated attribution method, even if the Price Hurdles are not met.

During the years ended January 31, 2025, 2024, and 2023, stock-based compensation expense related to performance-based and market-based restricted stock units $5.5 million, $2.8 million, and $1.3 million, respectively.

2015 ESPP

As of January 31, 2025, there was $5.5 million of unrecognized stock-based compensation expense related to the 2015 ESPP that is expected to be recognized over a weighted-average period of less thanone year.

Stock-Based Compensation

The following table summarizes the components of stock-based compensation expense recognized in the consolidated statements of operations (in thousands):

Year Ended January 31, 2021 2020 2019 Cost of revenue $ 18,936 $ 16,769 $ 14,065 Research and development 61,145 62,565 45,189 Sales and marketing 42,015 38,030 36,864 General and administrative 32,196 28,624 23,178 Total stock-based compensation $ 154,292 $ 145,988 $ 119,296

During the years ended January 31, 2025, 2024 and 2023, we capitalized $10.6 million, $7.0 million, and $4.4 million, respectively, of stock-based compensation expense related to eligible internal-use software projects.

Determination of Fair Value

We estimated the fair value of 2015 ESPP purchase rights using a Black-Scholes option pricing model with the following assumptions:

Year Ended January 31, 2021 2020 2019 Employee Stock Options Expected term (in years) 5.8 5.5 – 5.8 5.5 – 5.8 Risk-free interest rate 0.6% 1.8% 2.8% – 3.1% Volatility 46% 45% 45% Dividend yield 0% 0% 0% Employee Stock Purchase Plan Expected term (in years) 0.5 – 2.0 0.5 – 2.0 0.5 – 2.0 Risk-free interest rate 0.1% – 0.4% 1.7% – 2.5% 2.0% – 2.8% Volatility 44% – 54% 34% – 55% 37% – 50% Dividend yield 0% 0% 0%

The assumptions used in the Black-Scholes option pricing model were determined as follows:

Fair Value of Common Stock. We use the market closing price for our Class A common stock as reported on the New York Stock Exchange to determine the fair value of our common stock at each grant date.

Expected Term. The expected term represents the period that our share-based awards are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise terms and contractual lives of the options and 2015 ESPP purchase rights.

Expected Volatility. We estimate the expected volatility of the stock option grants and 2015 ESPP purchase rights based on the historical volatility of our Class A common stock over a period equivalent to the expected term of the stock option grants and 2015 ESPP purchase rights, respectively.

Risk-free Interest Rate. The risk-free rate that we use is based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options and 2015 ESPP purchase rights.

Dividend Yield. We have never declared or paid any cash dividends on our Class A common stock and do not plan to pay cash dividends on our Class A common stock in the foreseeable future, and, therefore, use an expected dividend yield ofzero.

Note 12. Net Income per Share Attributable to Common Stockholders

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

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income per share attributable to common stockholders for the periods presented because the impact of including them would have been antidilutive (in thousands):

Note 13. Income Taxes

The components of income before income taxes were as follows (in thousands):

The components of (benefit from) provision for income taxes were as follows (in thousands):

The following is a reconciliation of the difference between the effective income tax rate and the federal statutory rate of 21% (in thousands):

The significant components of our deferred tax assets and liabilities were as follows (in thousands):

We assess the realizability of deferred tax assets by considering whether it is more likely than not that some portion or all the deferred tax assets will not be realized. As a result, we continue to maintain a valuation allowance against our California deferred tax assets to the extent they are not offset by liabilities from uncertain tax positions.

In the fourth quarter of fiscal year 2025, we concluded that it is more likely than not that our U.S. federal and state deferred tax assets, with the exception of California, are realizable. We released $201.2 million of our valuation allowance associated with the U.S. federal and state deferred tax assets. These U.S. federal and state deferred tax assets were created primarily as a result of net operating loss carryforwards from historical business operations. A significant improvement in our profitability over the last three years coupled with anticipated future earnings provided positive evidence to support the conclusion that sufficient taxable income will be generated in the future and a valuation allowance is no longer necessary. As of January 31, 2025, we maintained our valuation allowance associated with the California state deferred tax assets.

During the years ended January 31, 2025 and 2024, the valuation allowance decreased by $202.2 million and $101.2 million, respectively.

Provisions enacted in the 2017 Tax Cuts and Jobs Act related to the capitalization for tax purposes of research and experimental (R&E) expenditures became effective for tax years beginning after December 31, 2021. Beginning in the year ended January 31, 2023, we began capitalizing and amortizing R&E expenditures over five years for domestic research and 15 years for international research rather than expensing these costs as incurred. As a result, we recorded a net deferred tax asset of $90.2 million and $68.0 million, respectively, related to the capitalization requirement during the years ended January 31, 2025 and 2024.

As of January 31, 2025, we had federal, state and foreign net operating loss carryforwards of $233.7 million, $487.3 million and $268.5 million, respectively, available to offset future taxable income. The federal net operating loss carryforwards generated prior to fiscal year 2019 will expire at various dates beginning in 2037, if not utilized. We have federal net operating loss carryforwards of $125.3 million, which can be carried forward indefinitely. The state net operating loss carryforwards will expire at various dates beginning in 2027, if not utilized. The foreign net operating loss carryforwards do not expire. In addition, as of January 31, 2025, we had federal and state research and development tax credit carryforwards of $69.4 million and $65.6 million, respectively. The federal research and development tax credit carryforwards will expire beginning in 2026, if not utilized. The state research and development tax credit carryforwards do not expire.

Utilization of the federal and state net operating loss may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. We completed a Section 382 ownership change analysis through fiscal year 2025 tax periods, which concluded that our net operating losses are not permanently limited. Subsequent ownership changes may further affect the limitation in future years but we do not expect that the annual limitations will significantly impact our ability to utilize net operating loss or tax credit carryforward.

We evaluate tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years.

A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):

It is reasonably possible that within the next 12 months our unrecognized tax benefits related to these matters may decrease by up to approximately $70.0 million due to refinement of certain tax return positions.

As of January 31, 2025, the balance of unrecognized tax benefits was $132.6 million of which $69.1 million, if recognized, would affect the effective tax rate and $63.5 million would result in adjustment to deferred tax assets with corresponding adjustments to the valuation allowance. The gross unrecognized tax benefits, if recognized, would not materially affect the effective tax rate as of January 31, 2024 and 2023.

Our policy is to classify interest and penalties associated with uncertain tax positions, if any, as a component of our income tax provision. Interest and penalties were not significant during the years ended January 31, 2025, 2024 and 2023.

We file tax returns in the U.S. for federal, California, and other states. All tax years remain open to examination for both federal and state purposes as a result of our net operating loss and credit carryforwards. We file tax returns in the U.K. and other foreign jurisdictions in which we operate. Tax years 2021 onwards remain open to examination for the U.K. Certain tax years remain open to examination under the statute of limitations of the respective countries in which our other foreign subsidiaries are located.