Zscaler Inc

Previous wording

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. We also generate an immaterial amount of revenue from professional and other services, which consist primarily of fees associated with mapping, implementation, network design and training. Our subscription pricing is primarily calculated on a per-user basis. We recognize subscription and support revenue ratably over the life of the contract, which is generally one to three years. As of July 31, 2023, we had expanded our operations to over 7,700 customers across major industries, with users in 185 countries. Government agencies and some of the largest enterprises in the world rely on us to support their digital transformation, including more than 640 of the Forbes Global 2000 as of July 31, 2023.

Current wording

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. We also generate an immaterial amount of revenue from professional and other services, which consist primarily of fees associated with mapping, implementation, network design and training. Our subscription pricing is primarily calculated on a per-user basis. We recognize subscription and support revenue ratably over the life of the contract, which is generally one to three years. As of July 31, 2024, we had expanded our operations to over 8,650 customers across major industries, with users in over 185 countries. Government agencies and some of the largest enterprises in the world rely on us to support their secure digital transformation, including approximately 35% of the Forbes Global 2000 as of July 31, 2024.

Previous wording

We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For the nine months ended April 30, 2024 and 2023, our revenue was $1,574.9 million and$1,161.9 million, respectively. We have incurred net losses in all annual periods since our inception. For the nine months ended April 30, 2024 and 2023, ournet loss was $42.8 million and $171.7 million, respectively. We expect we will continue to incur net losses for the foreseeable future, as we continue to invest in our sales and marketing organization to take advantage of our market opportunity, to invest in research and development efforts to enhance the functionality of our cloud platform, to incur additional compliance and other related costs as we operate as a public company, and to address any legal matters and related accruals, as further described in Note 11, Commitments and Contingencies, of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

We operate our business as one reportable segment. Our revenue has experienced significant growth in recent periods. For the three months ended October 31, 2024 and 2023, our revenue was $628.0 million and$496.7 million, respectively. We have incurred net losses in all annual periods since our inception. For the three months ended October 31, 2024 and 2023, ournet loss was $12.1 million and $33.5 million, respectively. We expect we will continue to incur net losses for the foreseeable future, as we continue to invest in our sales and marketing organization to maximize our market opportunity, to invest in research and development efforts to enhance the functionality of our cloud platform, and to address any legal matters and related accruals, as further described in Note 10, Commitments and Contingencies, of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Recent changes in macroeconomic conditions such as high inflation, high interest rates and potential recessionary environments, and geopolitical factors, such as the Russia-Ukraine and Israel-Hamas crises, can cause uncertainty in our business. We continue to see customer scrutiny of and elongated approval processes for transactions, particularly larger deals, as customers continue to scrutinize purchasing decisions and are requiring multiple approvals for large expenditures in response to the challenging economic environment. These macroeconomic conditions may impact the future demand for subscriptions of our cloud platform.

Current wording

Changes in macroeconomic and geopolitical conditions can cause uncertainty in our business. We continue to see customer scrutiny of and elongated approval processes for transactions, particularly larger deals, as customers continue to scrutinize purchasing decisions and are requiring multiple approvals for large expenditures in response to the uncertain economic environment. These macroeconomic conditions may impact the future demand for subscriptions of our cloud platform.

Previous wording

The adoption of cloud applications and infrastructure, explosion of internet traffic volumes and shift to mobile-first computing generally, and the pace at which enterprises adopt the internet as their corporate network in particular, impact our ability to drive market adoption of our cloud platform. We believe that most enterprises are in the early stages of a broad transformation to the cloud. Organizations are increasingly relying on the internet to operate their businesses, deploying new SaaS applications and migrating internally managed line-of-business applications to the cloud. However, the growing dependence on the internet has increased exposure to malicious or compromised websites, and sophisticated hackers are exploiting the gaps left by legacy network security appliances. To securely access the internet and transform their networks, organizations must also make fundamental changes in their network and security architectures. We believe that most organizations have yet to fully make these investments. Since we enable organizations to securely embrace digital transformation, we believe that the imperative for organizations to securely move to the cloud will increase demand for our cloud platform and broaden our customer base.

Current wording

The adoption of cloud applications and infrastructure, explosion of internet traffic volumes and shift to mobile-first computing generally, and the pace at which enterprises adopt the internet as their corporate network in particular, impact our ability to drive market adoption of our cloud platform. We believe that most enterprises are in the early stages of a broad transformation to the cloud. Organizations are increasingly relying on the internet to operate their businesses, deploying new SaaS applications and migrating internally managed line-of-business applications to the cloud. However, the growing dependence on the internet and expanding digital transformation have increased exposure to malicious or compromised websites, and sophisticated hackers are exploiting the gaps left by legacy network security appliances. To securely access the internet and transform their networks, organizations must also make fundamental changes in their network and security architectures. We believe that most organizations have yet to fully make these investments. As our cloud platform enables organizations to securely embrace digital transformation, we believe that the imperative for organizations to securely move to the cloud will increase demand for our cloud platform and broaden our customer base.

Previous wording

We believe that our ability to increase the number of customers, and more significantly, customers in the Forbes Global 2000, on our cloud platform is an indicator of our market penetration and our future business opportunities. As of July 31, 2023 and 2022, we had over 7,700 and over 6,700 customers, respectively, across all major geographies. As of July 31, 2023, we had over 640 of the Forbes Global 2000 as customers. Our ability to continue to grow these numbers will increase our future opportunities for renewals and follow-on sales. We believe that we have significant room to capture additional market share and intend to continue to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness, further leverage our channel partnerships and drive adoption of our solution. However, as a result of the challenging and uncertain economic environment, potential new customers are carefully considering purchasing decisions, particularly for large expenditures. We expect customer cautiousness to continue in the near term, elongating our sales cycles and the timing of large deals.

Current wording

We believe that our ability to increase the number of customers, and more significantly, customers in the Forbes Global 2000, on our cloud platform is an indicator of our market penetration and our future business opportunities. As of July 31, 2024 and 2023, we had over 8,650 and over 7,700 customers, respectively, across all major geographies. As of July 31, 2024, we had approximately 35% of the Forbes Global 2000 as customers. Our ability to continue to grow these numbers will increase our future opportunities for renewals and follow-on sales. We believe that we have significant room to capture additional market share and intend to continue to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness, further leverage our channel partnerships and drive adoption of our solution. However, as a result of the challenging and uncertain economic environment, potential new customers are carefully considering purchasing decisions, particularly for large expenditures. We expect customer cautiousness to continue in the near term, elongating our sales cycles and the timing of large deals.

Previous wording

These purchases increase the annual recurring revenue ("ARR") attributable to our customers over time. To establish ARR for a customer, we use the total amount of each order booked to compute the annual recurring value of revenue that we would recognize if the customer continues to renew all contractual subscriptions. For example, a contract for $3.0 million with a contractual term of three years would have an ARR of $1.0 million as long as our customer uses our cloud platform.

Current wording

These purchases increase the annual recurring revenue, or ARR, attributable to our customers over time. To establish ARR for a customer, we use the total amount of each order booked to compute the annual recurring value of revenue that we would recognize if the customer continues to renew all contractual subscriptions. For example, a contract for $3.0 million with a contractual term of three years would have an ARR of $1.0 million as long as our customer uses our cloud platform.

Previous wording

We believe that dollar-based net retention rate is a key metric to measure the long-term value of our customer relationships because it is driven by our ability to retain and expand the recurring revenue generated from our existing customers. Our dollar-based net retention rate compares the recurring revenue from a set of customers against the same metric for the prior 12-month period on a trailing basis. Because our customers have repeat buying patterns and the average term of our contracts is more than 12 months, we measure this metric over a set of customers who were with us as of the last day of the same reporting period in the prior fiscal year. Our dollar-based net retention rate includes customer attrition. We have not experienced a material increase in customer attrition rates in recent periods. For the trailing 12 months ended April 30, 2024 and 2023, the dollar-based net retention rate was 116% and above 125%, respectively.

Current wording

We believe that dollar-based net retention rate is an indicator to measure the long-term value of our customer relationships because it is driven by our ability to retain and expand the recurring revenue generated from our existing customers. Our dollar-based net retention rate compares the recurring revenue from a set of customers against the same metric for the prior 12-month period on a trailing basis. Because our customers have repeat buying patterns and the average term of our contracts is more than 12 months, we measure this metric over a set of customers who were with us as of the last day of the same reporting period in the prior fiscal year. For the trailing 12 months ended October 31, 2024 and 2023, the dollar-based net retention rate was 114% and 120%, respectively.

Previous wording

We define non-GAAP income from operations as GAAP loss from operations, excluding stock-based compensation expense and related payroll taxes, amortization expense of acquired intangible assets, and restructuring and other charges. We define non-GAAP operating margin as non-GAAP income from operations as a percentage of revenue.

Current wording

We define non-GAAP income from operations as GAAP loss from operations, excluding stock-based compensation expense and related payroll taxes and amortization expense of acquired intangible assets. We define non-GAAP operating margin as non-GAAP income from operations as a percentage of revenue.

Previous wording

Calculated billings is a non-GAAP financial measure that we believe is a key metric to measure our periodic performance. Calculated billings represents our total revenue plus the change in deferred revenue in a period. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Calculated billings increased $145.7 million, or 30%, for the three months ended April 30, 2024 over the three months ended April 30, 2023 and $396.0 million, or 30%, for thenine months ended April 30, 2024 over thenine months ended April 30, 2023. As calculated billings continues to grow in absolute terms, we expect our calculated billings growth rate to trend down over time. We also expect that calculated billings will be affected by seasonality in terms of when we enter into agreements with customers; and the mix of billings in each reporting period as we typically invoice customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance.

Current wording

Calculated billings is a non-GAAP financial measure that we believe is a key metric to measure our periodic performance. Calculated billings represents our total revenue plus the change in deferred revenue in a period. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers. We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Calculated billings increased $60.1 million, or 13%, for the three months ended October 31, 2024 over the three months ended October 31, 2023. As calculated billings continues to grow in absolute terms, we expect our calculated billings growth rate to trend down over time. We also expect that calculated billings will be affected by seasonality in terms of when we enter into agreements with customers; and the mix of billings in each reporting period.

Previous wording

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. Subscription and related support services accounted for approximately 98% and 97% of our revenue for the three and nine months ended April 30, 2024, respectively, and 97% of our revenue for each of the three and nine months ended April 30, 2023, respectively. Our contracts with our customers do not at any time provide the customer with the right to take possession of the software that runs our cloud platform. Our customers may also purchase professional services, such as mapping, implementation, network design and training. Professional services account for an immaterial portion of our revenue.

Current wording

We generate revenue primarily from sales of subscriptions to access our cloud platform, together with related support services. Subscription and related support services accounted for approximately 97% of our revenue for the three months ended October 31, 2024 and 2023. Our contracts with our customers do not at any time provide the customer with the right to take possession of the software that runs our cloud platform. Our customers may also purchase professional services, such as mapping, implementation, network design and training. Professional services account for an immaterial portion of our revenue.

Previous wording

We generally experience seasonality in terms of when we enter into agreements with our customers. We typically enter into a higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in our second and fourth fiscal quarters. However, because we recognize revenue ratably over the terms of our subscription contracts, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Accordingly, the effect of downturns in sales and market acceptance of our platform, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods.

Current wording

We generally experience seasonality in terms of when we enter into agreements with our customers. We typically enter into a higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in our second half of our fiscal year. However, because we recognize revenue ratably over the terms of our subscription contracts, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Accordingly, the effect of downturns in sales and market acceptance of our platform, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods.

Previous wording

Cost of revenue includes expenses related to operating our cloud platform in data centers, depreciation of our data center equipment, amortization of our capitalized internal-use software, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses (i.e., facilities, IT, depreciation expense and amortization expense). Cost of revenue also includes employee-related expenses, including salaries, bonuses, stock-based compensation expense and employee benefit expenses associated with our customer support and cloud operations organizations.

Current wording

Cost of revenue includes expenses related to operating our cloud platform in data centers, including public cloud providers, depreciation of our data center equipment, amortization of our capitalized internal-use software, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses (i.e., facilities, IT, depreciation expense and amortization expense). Cost of revenue also includes employee-related expenses, including salaries, bonuses, stock-based compensation expense and employee benefit expenses associated with our customer support and cloud operations organizations.

Previous wording

Our operating expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses and restructuring and other charges. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and, with respect to sales and marketing expenses, sales commissions that are recognized as expenses over the period of benefit. Operating expenses also include overhead expenses for facilities, IT, depreciation expense and amortization expense.

Current wording

Our operating expenses consist of sales and marketing expenses, research and development expenses and general and administrative expenses. Personnel expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and, with respect to sales and marketing expenses, sales commissions that are recognized as expenses over the period of benefit. Operating expenses also include overhead expenses for facilities, IT, depreciation expense and amortization expense.

Previous wording

Sales and marketing expenses consist primarily of employee compensation and related expenses, including salaries, bonuses and benefits for our sales and marketing employees, sales commissions that are recognized as expenses over the period of benefit, stock-based compensation expense, marketing programs, travel and entertainment expenses, expenses for conferences and events, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses. We capitalize our sales commissions and associated payroll taxes and recognize them as expenses over the estimated period of benefit. The amount recognized in our sales and marketing expenses reflects the amortization of expenses previously deferred as attributable to each period presented in this Quarterly Report on Form 10-Q, as described below under "Critical Accounting Policies and Estimates."

Current wording

Sales and marketing expenses consist primarily of employee compensation and related expenses, including salaries, bonuses and benefits for our sales and marketing employees, sales commissions that are recognized as expenses over the period of benefit, stock-based compensation expense, marketing programs, travel and entertainment expenses, expenses for conferences and events, amortization of intangible assets acquired through our business acquisitions and allocated overhead expenses. We capitalize our sales commissions and associated payroll taxes that are incremental to the acquisition of customer contracts and recognize them as expenses over the estimated period of benefit. The amount recognized in our sales and marketing expenses reflects the amortization of expenses previously deferred as attributable to each period presented in this Quarterly Report on Form 10-Q, as described below under "Critical Accounting Policies and Estimates."

Previous wording

Revenue increased by $134.4 million, or 32%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed $91.4 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 14%from April 30, 2023 to April 30, 2024.

Current wording

Revenue increased by $131.3 million, or 26%, for the three months ended October 31, 2024, compared to the three months ended October 31, 2023. The change in revenue was driven primarily by an increase in users and sales of additional subscriptions to existing customers, which contributed $94.7 million in additional revenue. The remainder of the increase was primarily attributable to the addition of new customers, as we increased our customer base by 12%from October 31, 2023 to October 31, 2024.

Previous wording

Cost of revenue increased by $22.5 million, or 23%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023. The change was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of $13.9 million for data center and equipment related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by $7.6 million, inclusive of an increase of $2.1 million in stock-based compensation expense, driven primarily by an increase in headcount in our customer support and cloud operations organizations.

Current wording

Cost of revenue increased by $30.1 million, or 27%, for the three months ended October 31, 2024, compared to the three months ended October 31, 2023. The change was driven primarily by the expanded use of our cloud platform by existing and new customers, which led to an increase of $19.3 million for data center and equipment related costs for hosting and operating our cloud platform. Additionally, our employee-related expenses increased by $10.2 million, inclusive of an increase of $2.6 million in stock-based compensation expense, driven primarily by an increase in headcount in our customer support and cloud operations organizations.

Previous wording

Sales and marketing expenses increased by $26.2 million, or 11%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023. The change was primarily driven by an increase of $9.1 million in employee-related expenses, inclusive of an increase of $8.3 million in sales commissions expense and a decrease of $8.6 million instock-based compensation expense. The decreasein stock-based compensation expense was primarily driven by the reversal in February 2024 of $11.7 million of stock-based compensation expense associated with the cancellation of unvested equity awards as a result of the departure of our Chief Operating Officer, who led sales activities. The increase in employee related expenses was primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $8.5 million in marketing and advertising expenses, $5.2 million in travel expenses and $3.1 million in facility related expenses.

Current wording

Sales and marketing expenses increased by $39.0 million, or 15%, for the three months ended October 31, 2024, compared to the three months ended October 31, 2023. The change was driven primarily by an increase of$28.8 million in employee-related expenses, inclusive of an increase of $8.7 million in sales commissions expense and an increase of $6.5 million instock-based compensation expense. The increase in employee-related expenses was primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $6.4 million in marketing and advertising expenses and $2.1 million in travel expenses.

Previous wording

Research and development expenses increased by $32.3 million, or 35%, for the three months ended April 30, 2024, compared to the three months ended April 30, 2023, as we continued to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business combinations. The change was driven primarily by an increase of $31.9 million in employee-related expenses, inclusive of an increase of $13.3 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $6.1 million in facility, software and equipment related expenses to support our growth. The net increase was offset by higher capitalized internal-use software development costs of $6.6 million to support the enhancement and growth of our cloud platform.

Current wording

Research and development expenses increased by $40.7 million, or 36%, for the three months ended October 31, 2024, compared to the three months ended October 31, 2023, as we continue to develop and enhance the functionality of our cloud platform and integrate technologies acquired through our business acquisitions. The change was driven primarily by an increase of $45.7 million in employee-related expenses, inclusive of an increase of $17.9 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase was primarily attributable to increased expenses of $8.8 million in facility, cloud hosting, software and equipment related expenses to support our growth. The increase was offset by higher capitalized internal-use software development costs of $15.0 million to support the enhancement and growth of our cloud platform.

Previous wording

General and administrative expenses increased by $24.6 million, or 19%, for the nine months ended April 30, 2024, compared to the nine months ended April 30, 2023. The change was driven primarily by an increase of $18.8 million in employee-related expenses, inclusive of anincreaseof $5.2 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase is due to $2.9 million in the facility related expensesand the increase of miscellaneous expenses to support the growth of our business.

Current wording

General and administrative expenses increased by $6.1 million, or 12%, for the three months ended October 31, 2024, compared to the three months ended October 31, 2023. The change was driven primarily by an increase of $3.9 million in employee-related expenses, inclusive of an increase of $1.0 million in stock-based compensation expense, primarily due to an increase in headcount. The remainder of the increase is due to theincrease of miscellaneous expenses to support the growth of our business.

Previous wording

Interest income increased by $9.0 million for the three months ended April 30, 2024, compared to the three months ended April 30, 2023. The change was driven primarily by higher interest rates and our increased balance of cash equivalents and short-term investments.

Current wording

Interest income increased by $4.1 million, or 16%, for the three months ended October 31, 2024, compared to the three months ended October 31, 2023. The change was driven primarily by our increased balance of cash equivalents and short-term investments.

Previous wording

Other expense, net increased for the three months ended April 30, 2024 compared to the three months ended April 30, 2023. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Current wording

Other expense, net decreased by $0.6 million for the three months ended October 31, 2024 compared to the three months ended October 31, 2023. The change was driven primarily by fluctuations in foreign currency transactions gains and losses.

Previous wording

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We assess our ability to realize our deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses in certain jurisdictions, we believe that it is more likely than not that our U.S. federal, state, and U.K. deferred tax assets will not be realized. Accordingly, we have maintained a valuation allowance on our U.S. federal, state, and U.K. deferred tax assets.

Current wording

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We assess our ability to realize the deferred tax assets on a quarterly basis and we establish a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. We weigh all available positive and negative evidence, including our earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including our history of losses in certain jurisdictions, we believe that it is more likely than not that our U.S. federal, state and foreign jurisdictions deferred tax assets will not be realized. Accordingly, we have maintained a valuation allowance on our U.S. federal, state and certain foreign jurisdiction deferred tax assets.

Previous wording

As of April 30, 2024, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,240.0 million which were held for working capital and general corporate purposes. Our cash equivalents and investments consist of highly liquid investments in money market funds, U.S. treasury securities, U.S. government agency securities and corporate debt securities.

Current wording

As of October 31, 2024, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,707.9 million which were held for working capital and general corporate purposes. Our cash equivalents and investments consist of highly liquid investments in money market funds, U.S. treasury securities, U.S. government agency securities, certificates of deposit and corporate debt securities.

Previous wording

We have generated significant losses from operations, as reflected in our accumulated deficit of $1,133.2 million as of April 30, 2024. We expect to continue to incur operating losses and have in the past and may in the future generate negative cash flows due to expected investments to grow our business, including potential business acquisitions and other strategic transactions.

Current wording

We have generated significant losses from operations, as reflected in our accumulated deficit of $1,160.1 million as of October 31, 2024. We expect to continue to incur operating losses and have in the past and may in the future generate negative cash flows due to expected investments to grow our business, including potential business acquisitions and other strategic transactions.

Previous wording

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operating and capital needs for at least the next 12 months from the issuance of our financial statements. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures to support expansion of our infrastructure and workforce, lease obligations, purchase commitments, potential business acquisitions and other strategic transactions. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of, and our future capital requirements, both near-term and long-term, will depend on, many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing and international operating activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our services, the impact of macroeconomic conditions, such as high inflation and recessionary environments, and the impact of global crises to our and our customers', vendors' and partners' businesses. We have and may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Additionally, some of the factors that may influence our operations are not within our control, such as general economic conditions, geopolitical developments and the impact of global crises. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.

Current wording

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our working capital, capital expenditure and convertible senior notes repayment requirements for at least the next 12 months from the issuance of our financial statements. Our foreseeable cash needs, in addition to our recurring operating costs, include our expected capital expenditures to support expansion of our infrastructure and workforce, lease obligations, purchase commitments, potential business acquisitions, convertible senior notes repayment requirements and other strategic transactions. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of, and our future capital requirements, both near-term and long-term, will depend on, many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing and international operating activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our services, the impact of macroeconomic and geopolitical conditions to our and our customers', vendors' and partners' businesses. We have and may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Additionally, some of the factors that may influence our operations are not within our control, such as general economic conditions, geopolitical developments and the impact of global crises. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.

Previous wording

We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets as a contract liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy. As of April 30, 2024, we had deferred revenue of $1,577.0 million, of which $1,376.7 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance contribute significantly to our short-term and long-term deferred revenue in comparison to our invoices issued quarterly in advance or monthly in advance. Accordingly, we cannot predict the mix of invoicing schedules in any given period.

Current wording

We typically invoice our customers annually in advance, and to a lesser extent quarterly in advance, monthly in advance or multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets as a contract liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is subsequently recognized as revenue in accordance with our revenue recognition policy. As of October 31, 2024, we had deferred revenue of $1,783.7 million, of which $1,533.1 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met. Subscriptions that are invoiced annually in advance or multi-year in advance contribute significantly to our short-term and long-term deferred revenue in comparison to our invoices issued quarterly in advance or monthly in advance. Accordingly, we cannot predict the mix of invoicing schedules in any given period.

Previous wording

Net cash provided by operating activities during the nine months ended April 30, 2023 was $326.4 million, which resulted from a net loss of $171.7 million, adjusted for non-cash charges of$462.9 million and net cash inflows of$35.2 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $322.7 million for stock-based compensation expense, $71.4 million for amortization of deferred contract acquisition costs, $39.8 million for depreciation and amortization expense, $23.3 million for non-cash operating lease costs and $8.1 million for amortization expense of acquired intangible assets. Net cash inflows from changes in operating assets and liabilities were primarily the result of an increase of $154.3 million in deferred revenue, a decrease of $23.0 million in accounts receivable, primarily due to timing of billings and collections, an increase of $14.9 million in accrued expenses, other current and noncurrent liabilities, and an increase of $10.9 million in accrued compensation. Net cash inflows were partially offset by cash outflows resulting from an increase of $110.6 million in deferred contract acquisition costs, a decrease of $23.6 million in operating lease liabilities, an increase of $29.6 million in prepaid expenses, other current and noncurrent assets, and a decrease of $4.1 million in accounts payable.

Current wording

Net cash provided by operating activities during the three months ended October 31, 2024 was $331.3 million, which resulted from a net loss of $12.1 million, adjusted for non-cash charges of $238.1 million and net cash inflows of $105.3 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $157.2 million for stock-based compensation expense, $39.1 million for amortization of deferred contract acquisition costs, $21.4 million for depreciation and amortization expense, $15.7 million for non-cash operating lease costs and $4.2 million for amortization expense of acquired intangible assets and unrealized losses on hedging transactions of $3.7 million. Non-cash charges were partially offset by accretion of investments purchased at a discount of $5.0 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of $312.0 million in accounts receivable and an increase of $1.0 million in accounts payable. Net cash inflows were partially offset by cash outflows resulting from a decrease of $111.3 million in deferred revenue, a decrease of $34.4 million in accrued compensation, an increase of $32.8 million in deferred contract acquisition costs, a decrease of $14.2 million in operating lease liabilities, an increase of $8.8 million in prepaid expenses, other current and noncurrent assets and a decrease of $6.2 million in accrued expenses.

Previous wording

Net cash provided by operating activities during the nine months ended April 30, 2024 was $576.3 million, which resulted from a net loss of $42.8 million, adjusted for non-cash charges of $554.8 million and net cash inflows of $64.3 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $382.8 million for stock-based compensation expense, $94.7 million for amortization of deferred contract acquisition costs, $47.0 million for depreciation and amortization expense, $34.9 million for non-cash operating lease costs and $9.5 million for amortization expense of acquired intangible assets. Non-cash charges were partially offset by accretion of investments purchased at a discount of $14.6 million and deferred income taxes of $5.8 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of an increase of $132.4 million in deferred revenue, a decrease of $78.4 million in accounts receivable, primarily due to timing of billings and collections, an increase of $14.6 million in accrued expenses, other current and noncurrent liabilities and an increase of $7.5 million in accounts payable. Net cash inflows were partially offset by cash outflows resulting from an increase of $122.7 million in deferred contract acquisition costs, a decrease of $35.4 million in operating lease liabilities and an increase of $23.5 million in prepaid expenses, other current and noncurrent assets.

Current wording

Net cash provided by operating activities during the three months ended October 31, 2023 was $260.8 million, which resulted from a net loss of $33.5 million, adjusted for non-cash charges of$186.5 million and net cash inflows of$107.8 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $129.1 million for stock-based compensation expense, $30.1 million for amortization of deferred contract acquisition costs, $14.0 million for depreciation and amortization expense, $9.9 million for non-cash operating lease costs, $3.0 million for amortization expense of acquired intangible assets and unrealized losses on hedging transactions of $1.6 million. Non-cash charges were partially offset by accretion of investments purchased at a discount of $3.2 million. Net cash inflows from changes in operating assets and liabilities were primarily the result of $215.1 million in accounts receivable, primarily due to timing of billings and collections, an increase of $4.9 million in accrued expenses, other current and noncurrent liabilities, an increase of $4.6 million in accounts payable and a decrease of $1.3 million in prepaid expenses, other current and noncurrent assets. Net cash inflows were partially offset by cash outflows resulting from a decrease of $40.2 million in deferred revenue, a decrease of $39.2 million in accrued compensation, an increase of $27.7 million in deferred contract acquisition costs and a decrease of $11.0 million in operating lease liabilities.

Previous wording

Net cash used in investing activities during the nine months ended April 30, 2024 of $609.0 million was primarily attributable to the purchases of short-term investments of $1,004.0 million, capital expenditures of $127.7 million to support the growth and expansion of our cloud platform, and $361.8 million, net of cash acquired for a business acquisitions, and expenditures on strategic investments of $2.0 million. These activities were partially offset by proceeds from the maturities and sales of short-term investments of$886.4 million.

Current wording

Net cash used in investing activities during the three months ended October 31, 2024 of $201.7 million was primarily attributable to purchases of short-term investments of $430.3 million and capital expenditures of $39.5 million to support the growth and expansion of our cloud platform. These activities were partially offset by proceeds from maturities of short-term investments of$268.7 million.

Previous wording

Net cash used in investing activities during the nine months ended April 30, 2023 of $78.9 million was primarily attributable to the purchases of short-term investments of $740.2 million, capital expenditures of $94.1 million to support the growth and expansion of our cloud platform, $15.6 million, net of cash acquired for a business acquisitions, and expenditures on strategic investments of $2.2 million. These activities were partially offset by proceeds from the maturities and sales of short-term investments of $773.2 million.

Current wording

Net cash used in investing activities during the three months ended October 31, 2023 of $162.5 million was primarily attributable to purchases of short-term investments of $375.9 million, capital expenditures of $36.1 million to support the growth and expansion of our cloud platform, and payment for a business acquisition of $4.4 million, net of cash acquired. These activities were partially offset by proceeds from maturities of short-term investments of $253.8 million.

Previous wording

Net cash provided by financing activities of $29.7 million during the nine months ended April 30, 2024 was primarily attributable to $18.4 million in proceeds from the issuance of common stock under the ESPP and $11.3 million in proceeds from the exercise of stock options.

Current wording

Net cash provided by financing activities during the three months ended October 31, 2024 of $0.9 million was attributable to proceeds from the exercise of stock options.

Previous wording

Net cash provided by financing activities of $14.6 million during the nine months ended April 30, 2023 was primarily attributable to $11.4 million in proceeds from the issuance of common stock under the ESPP and $3.2 million in proceeds from the exercise of stock options.

Current wording

Net cash provided by financing activities during the three months ended October 31, 2023 of $1.3 million was attributable to proceeds from the exercise of stock options.

Previous wording

During the nine months ended April 30, 2024, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments from those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Fiscal 2023 Form 10-K, other than to non-cancelable purchase obligations. For further information refer to Note 11, Commitments and Contingencies, of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

During the three months ended October 31, 2024, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments from those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Fiscal 2024 Form 10-K, other than our non-cancelable purchase obligations. For further information refer to Note 10, Commitments and Contingencies, of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.