Rubrik Inc

Previous wording

We began transitioning customers from our legacy CDM capabilities to RSC in fiscal 2023, all of which are subscription-based offerings. As part of this business transition, we began transitioning the sale of Rubrik-branded Appliances from us to our contract manufacturers and stopped offering the Refresh Rights as part of our subscription offerings. In lieu of the outstanding Refresh Rights, upon qualification, we offer Subscription Credits, with an associated expiration date, which, if utilized, will offset against Subscription ARR and revenue. As of the end of fiscal 2024, RSC represented a majority of our total revenue.

Current wording

We began transitioning customers from our legacy CDM capabilities to RSC, which is offered on a subscription basis, in fiscal 2023. As part of this business transition, we began transitioning the sale of Rubrik-branded Appliances from us to our contract manufacturers and stopped offering the Refresh Rights as part of our subscription offerings. In lieu of the outstanding Refresh Rights, upon qualification, we offer Subscription Credits, with an associated expiration date, which, when utilized, are an offset against Subscription ARR and revenue. As of the end of fiscal 2024, RSC represented a majority of our total revenue.

Previous wording

We expect new and existing customers to increasingly adopt RSC. Our new customers have generally been rapidly adopting the RSC platform. We are actively migrating our existing customers from our legacy CDM capabilities to RSC. As part of this migration, we expect certain existing customers to consume our platform and products through a mix of RSC and a transitional CDM license ("CDM-T"), during which time we expect to continue recognizing a portion of the associated revenue from these customers upfront at the time we transfer control of the license to the customer. We cannot predict how long these customers will use this mix before they complete their transition. Our revenue will fluctuate when qualified customers choose to exercise or forfeit their Subscription Credits upon expiry date which are customer options that are accounted for as material rights.

Current wording

We expect new and existing customers to increasingly adopt RSC. Our new customers have generally been rapidly adopting the RSC platform. We are actively migrating our existing customers from our legacy CDM capabilities to RSC. As part of this migration, we expect certain existing customers to consume our platform and products through a mix of RSC and a transitional CDM license ("RCDM-T"), during which time we expect to continue recognizing a portion of the associated revenue from these customers upfront at the time we transfer control of the license to the customer. We cannot predict how long these customers will use this mix before they complete their transition. Our revenue will fluctuate when qualified customers choose to exercise or forfeit their Subscription Credits (which are customer options that are accounted for as material rights) upon their associated expiration date.

Previous wording

Our ability to retain customers and expand within existing customers is integral to our growth and future success. Our growing base of customers represents a significant opportunity for further expansion across our platform. Our customers typically start with securing data in one or more applications on our platform, and then expand by securing additional applications and increasing the amount of data secured. They further extend their use of our platform through adoption of additional security products. Several of our largest customers have deployed our platform to protect enterprise, unstructured data, cloud, and SaaS applications, securing large amounts of their data. Our ability to expand and extend within our customer base will depend on a number of factors, including platform performance, our customers’ satisfaction with our platform, competitive offerings, pricing, overall changes in our customers’ spending levels, and the effectiveness of our efforts to help our customers realize the benefits of our platform.

Current wording

Our ability to retain customers and expand within existing customers is integral to our growth and future success. Our growing base of customers represents a significant opportunity for further expansion across our platform. Our customers typically start with securing data in one or more applications on our platform, and then expand by securing additional applications and increasing the amount of data secured. They further extend their use of our platform through adoption of additional security products. Several of our largest customers have deployed our platform to protect enterprise, unstructured data, cloud, and SaaS applications, securing large amounts of their data. Our ability to expand and extend within our customer base depends on, and has been impacted by, a number of factors, including platform performance, our customers’ satisfaction with our platform, competitive offerings, pricing, overall changes in our customers’ spending levels, and the effectiveness of our efforts to help our customers realize the benefits of our platform.

Previous wording

The following table sets forth our Subscription ARR as of the dates presented (in thousands, except percentages):

Current wording

The following table sets forth our Subscription ARR as of the dates presented:

Previous wording

Subscription ARR does not include any maintenance revenue associated with perpetual licenses, which we generally no longer offer. Of the 46% and 86% growth, approximately three percentage points and 13 percentage points of growth for three months ended April 30, 2024 and 2023, respectively, were a result of transitioning our existing maintenance customers to our subscription editions.

Current wording

Subscription ARR does not include any maintenance revenue associated with perpetual licenses, which we generally no longer offer. Of the 40% and 72% growth, 2.5 percentage points and approximately 9.0 percentage points of growth for the twelve months ended

Previous wording

Cloud ARR is calculated as the annualized value of our active cloud-based subscription contracts as of the measurement date, based on our customers’ total contract value and, assuming any contract that expires during the next 12 months is renewed on existing terms. Our cloud-based subscription contracts include RSC and RSC-Government (excluding RSC-Private) and SaaS subscription products like Anomaly Detection and Sensitive Data Monitoring. Cloud ARR also includes SaaS subscription products Anomaly Detection and Sensitive Data Monitoring sold standalone or with prior sales of term-based license offerings of CDM. We believe that Cloud ARR provides important information on new and existing customers purchasing new RSC subscription offerings and existing subscription term-based license customers renewing with RSC subscription offerings.

Current wording

Cloud ARR is calculated as the annualized value of our active cloud-based subscription contracts as of the measurement date, based on our customers’ total contract value, and assuming any contract that expires during the next 12 months is renewed on existing terms. Our cloud-based subscription contracts include RSC and RSC-Government (excluding RSC-Private). Cloud ARR also includes SaaS subscription products like Anomaly Detection and Sensitive Data Monitoring, which are sold standalone or with prior sales of term-based license offerings of CDM. We believe that Cloud ARR provides important information on new and existing customers purchasing new RSC subscription offerings and existing subscription term-based license customers renewing with RSC subscription offerings.

Previous wording

The following table sets forth our Cloud ARR as of the dates presented (in thousands, except percentages):

Current wording

The following table sets forth our Cloud ARR as of the dates presented:

Previous wording

Our average subscription dollar-based net retention rate compares our Subscription ARR from the same set of subscription customers across comparable periods. We calculate our average subscription dollar-based net retention rate by first identifying subscription customers (the "Prior Period Subscription Customers"), which were subscription customers at the end of a particular quarter (the "Prior Period"). We then calculate the Subscription ARR from these Prior Period Subscription Customers at the end of the same quarter of the subsequent year (the "Current Period"). This calculation captures upsells, contraction, and attrition since the Prior Period. We then divide total Current Period Subscription ARR by the total Prior Period Subscription ARR for Prior Period Subscription Customers. Our average subscription dollar-based net retention rate in a particular quarter is obtained by averaging the result from that particular quarter with the corresponding results from each of the prior three quarters. We believe that our average subscription dollar-based net retention rate provides useful information about the evolution of our existing customers as they expand through the increase of data from applications we already secure, new applications for us to secure, additional data security products, and conversion of our recurring revenue related to maintenance contracts into subscription revenue.

Current wording

Our average subscription dollar-based net retention rate compares our Subscription ARR from the same set of subscription customers across comparable periods. We calculate our average subscription dollar-based net retention rate by first identifying subscription customers (the "Prior Period Subscription Customers") that were subscription customers at the end of a particular quarter (the "Prior Period") and calculate the Subscription ARR from the Prior Period Subscription Customers. We then calculate the Subscription ARR from these Prior Period Subscription Customers at the end of the same quarter of the subsequent year (the "Current Period"). This calculation captures upsells, contraction, and attrition since the Prior Period. We then divide total Current Period Subscription ARR by the total Prior Period Subscription ARR for Prior Period Subscription Customers. Our average subscription dollar-based net retention rate in a particular quarter is obtained by averaging the result from that particular quarter with the corresponding results from each of the prior three quarters. We believe that our average subscription dollar-based net retention rate provides useful information about the evolution of our existing customers as they expand through the increase of data from applications we already secure, new applications for us to secure, additional data security products, and conversion of our recurring revenue related to maintenance contracts into subscription revenue.

Previous wording

Free cash flow was $(37.1) million and $(23.2) million for the three months ended April 30, 2024 and April 30, 2023, respectively. Free cash flow for the three months ended April 30, 2024 includes a cash outlay of $20.6 million for employer payroll taxes due to the vesting of certain equity awards in conjunction with the initial public offering. Adjusting for employer payroll taxes, the improvement in free cash flow was primarily due to higher sales and an increased number of payments before the due date for some of our distributors.

Current wording

Free cash flow was $(69.1) million and $(36.7) million for the six months ended July 31, 2024 and July 31, 2023, respectively. Free cash flow for the six months ended July 31, 2024 includes a cash outlay of $22.8 million for employer payroll taxes due to the vesting of certain equity awards in conjunction with the initial public offering. Adjusting for employer payroll taxes, the decrease in free cash flow was primarily due to higher expenses including expenses associated with our acquisition of Laminar which was completed in August 2023 and an increasing mix of annual and consumption payments from customers due to the growth in our Cloud and SaaS products. This trend when combined with changes in new business growth, may result in free cash flow volatility across periods.

Previous wording

In the longer term, we view continued Subscription ARR growth and our multi-year cash collection as primary drivers of free cash flow. While we continue to see the majority of our customers pay us for new multi-year commitments upfront, we have experienced an increase in annual and consumption payments due to the growth in our SaaS products and the uncertain macroeconomic environment. See the risk factor titled “We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline” in the section titled “Risk Factors.” This trend, when combined with changes in new business growth, may result in free cash flow volatility across periods.

Current wording

In the longer term, we view continued Subscription ARR growth and our multi-year cash collection as primary drivers of free cash flow. See the risk factor titled “We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline” in the section titled “Risk Factors.”

Previous wording

Subscription ARR Contribution Margin was (11)%, and (32)% for the 12 months ended April 30, 2024 and April 30, 2023, respectively. For the 12 months ended April 30, 2024, the non-GAAP operating expense includes the recognition of $22.8 million for employer payroll taxes due to the vesting of certain equity awards in conjunction with the initial public offering. Adjusting for this, the Subscription ARR Contribution Margin was (8%) for the 12 months ended April 30, 2024. The increase in Subscription ARR Contribution Margin was primarily driven by the strong year-over-year growth in Subscription ARR, compared to year-over-year growth in non-GAAP subscription costs of sales and non-GAAP operating expenses. We believe that this increase in Subscription ARR Contribution Margin reflects increased operating leverage in our business.

Current wording

Subscription ARR Contribution Margin was (8)%, and (22)% for the 12 months ended July 31, 2024 and July 31, 2023, respectively. For the 12 months ended July 31, 2024, the non-GAAP operating expense includes the recognition of $22.8 million for employer payroll taxes due to the vesting of certain equity awards in conjunction with the initial public offering. Adjusting for this, the Subscription ARR Contribution Margin was (6)% for the 12 months ended July 31, 2024. The increase in Subscription ARR Contribution Margin was primarily driven by the strong year-over-year growth in Subscription ARR, compared to year-over-year growth in non-GAAP subscription costs of sales and non-GAAP operating expenses. We believe that this increase in Subscription ARR Contribution Margin reflects increased operating leverage in our business.

Previous wording

SaaS includes SaaS subscription products like Anomaly Detection and Sensitive Data Monitoring sold standalone or with prior sales of term-based license offerings of CDM prior to the launch of the RSC platform as well as sales of RSC. RSC is offered as a fully-hosted subscription or a hybrid cloud subscription. RSC is a fully-hosted subscription in the case of protection of cloud, SaaS, and unstructured data applications. When RSC is securing enterprise applications, it is a hybrid cloud subscription which includes software hosted from the cloud (as a service) and an on-premise license for securing enterprise applications. The hybrid cloud subscription is accounted for as a single performance obligation because the software hosted from the cloud (as a service) and the on-premise software licenses are not separately identifiable and serve together to fulfill our promise to the customer, which is to provide a single, unified data security solution. Our subscription capabilities are primarily sold as editions which bundle multiple products and include the Foundation Edition, Business Edition, and Enterprise Edition. Subscription revenue related to SaaS is recognized ratably over the subscription period.

Current wording

SaaS includes SaaS subscription products like Anomaly Detection and Sensitive Data Monitoring sold standalone or with prior sales of term-based license offerings of CDM prior to the launch of the RSC platform as well as sales of RSC. RSC is offered as a fully-hosted subscription or a hybrid cloud subscription. RSC is a fully-hosted subscription in the case of protection of cloud, SaaS, and unstructured data applications. When RSC is securing enterprise applications, it is a hybrid cloud subscription which includes software hosted from the cloud (as a service) and an on-premise license for securing enterprise applications. The hybrid cloud subscription is accounted for as a single performance obligation because the software hosted from the cloud (as a service) and the on-premise software licenses are not separately identifiable and serve together to fulfill our promise to the customer, which is to provide a single, unified data security solution. Our subscription capabilities are primarily sold as editions which bundle multiple products and include the Foundation Edition, Business Edition, Enterprise Edition, and Enterprise Proactive Edition. Subscription revenue related to SaaS is recognized ratably over the subscription period.

Previous wording

As customers continue to adopt or transition to RSC, we expect the ratable portion of our subscription revenue to increase. We expect certain customers to consume our platform and products through a mix of RSC and CDM-T as they complete the migration, which will result in a recognition of a portion of the associated revenue for these customers upfront. Furthermore, our subscription revenue will also fluctuate when qualified customers choose to exercise or forfeit their customer options that are accounted for as material rights. The combination of both of these factors will limit and cause fluctuations in our subscription revenue growth through fiscal 2027, depending in part on the timing of our existing customers’ transition to RSC.

Current wording

As customers continue to adopt or transition to RSC, we expect the ratable portion of our subscription revenue to increase. We expect certain customers to consume our platform and products through a mix of RSC and RCDM-T as they complete the migration, which will result in a recognition of a portion of the associated revenue for these customers upfront. Furthermore, our subscription revenue will also fluctuate when qualified customers choose to exercise or forfeit their customer options that are accounted for as material rights. The combination of both of these factors will limit and cause fluctuations in our subscription revenue growth through fiscal 2027, depending in part on the timing of our existing customers’ transition to RSC.

Previous wording

Other revenue represents fees earned from sales of Rubrik-branded Appliances and professional services. We recognize revenue for the amount allocated to the perpetual software license at the later of the license term start date or the date the license is delivered. Revenue for Rubrik-branded Appliances is recognized when shipped to the customer. When we sell our software license with our Rubrik-branded Appliances, revenue for both the Rubrik-branded Appliances and software licenses are recognized at the same time. Revenue related to professional services is typically recognized as the services are performed. In the third quarter of fiscal 2023, we began transitioning the sale of Rubrik-branded Appliances from us to our contract manufacturers. We expect other revenue as a percentage of total revenue to decrease over time as we continue this transition.

Current wording

Other revenue represents fees earned from sales of Rubrik-branded Appliances and professional services. Revenue for Rubrik-branded Appliances is recognized when shipped to the customer. When we sell our software license with our Rubrik-branded Appliances, revenue for both the Rubrik-branded Appliances and software licenses are recognized at the same time. Revenue related to professional services is typically recognized as the services are performed. In the third quarter of fiscal 2023, we began transitioning the sale of Rubrik-branded Appliances from us to our contract manufacturers. We expect other revenue as a percentage of total revenue to decrease over time as we continue this transition.

Previous wording

Cost of revenue primarily includes employee compensation and related expenses associated with customer support, certain hosting costs, amortization of capitalized internal-use software, and cost of Rubrik-branded Appliances. We expect our cost of revenue, exclusive of stock-based compensation expense, as a percentage of revenue to generally decrease over the long term as we increasingly transition the sale of Rubrik-branded Appliances from us to our contract manufacturers.

Current wording

Cost of revenue primarily includes employee compensation and related expenses associated with customer support, certain hosting costs, amortization of capitalized internal-use software, and cost of Rubrik-branded Appliances.

Previous wording

Income tax expense (benefit) consists primarily of income taxes in certain foreign jurisdictions in which we conduct business, as well as federal and state income taxes in the United States. We have recorded U.S. federal and state net deferred tax assets for which we provide a full valuation allowance, which includes net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.

Current wording

Income tax expense consists primarily of income taxes in certain foreign jurisdictions in which we conduct business, as well as federal and state income taxes in the United States. We have recorded U.S. federal and state net deferred tax assets for which we provide a full valuation allowance, which includes net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.

Previous wording

The following tables summarize our consolidated statements of operations data for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

Current wording

The following tables summarize our condensed consolidated statements of operations data for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Comparison of the Three Months Ended April 30, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended July 31, 2024 and 2023

Previous wording

Subscription revenue increased $63.8 million for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023, representing a 59% increase. Growth in subscription revenue benefited from a moderate headwind from the transition to RSC relative to the year ago period. Our Subscription ARR grew from $587.5 million as of April 30, 2023 to $856.1 million as of April 30, 2024, representing a 46% increase. Of the increase in Subscription ARR, approximately three percentage points are a result of transitioning our existing maintenance customers to our subscription editions. A further indication of our ability to expand revenue from existing customers is through our average subscription dollar-based net retention rate which was over 120% as of April 30, 2024. We had 1,859 customers with $100,000 or more in Subscription ARR as of April 30, 2024, increasing from 1,314 as of April 30, 2023.

Current wording

Growth in subscription revenue was driven by growth in Subscription ARR but also benefited from the headwind in fiscal 2024 revenue related to the transition to RSC. Our Subscription ARR grew from $655.0 million as of July 31, 2023 to $919.1 million as of July 31, 2024, representing a 40% increase. Of the increase in Subscription ARR, 2.5 percentage points are a result of transitioning our existing maintenance customers to our subscription editions. A further indication of our ability to expand revenue from existing customers is through our average subscription dollar-based net retention rate which was greater than 120% as of July 31, 2024. We had 1,969 customers with $100,000 or more in Subscription ARR as of July 31, 2024, increasing from 1,463 as of July 31, 2023.

Previous wording

Maintenance revenue associated with sales of perpetual licenses of our legacy CDM product decreased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023. Maintenance revenue represented 3% and 9% of total revenue for the three months ended April 30, 2024 and 2023, respectively. We expect the transition of existing maintenance customers adopting RSC subscription offerings to be largely completed by the end of fiscal 2026.

Current wording

Maintenance revenue associated with sales of perpetual licenses of our legacy CDM product decreased for the three and six months ended July 31, 2024. Maintenance revenue represented 2% and 7% of total revenue for the three months ended July 31, 2024 and 2023, respectively and 3% and 8% of total revenue for the six months ended July 31, 2024 and 2023, respectively. We expect the transition of existing maintenance customers adopting RSC subscription offerings to be largely completed by the end of fiscal 2026.

Previous wording

Other revenue, which consists primarily of sales of Rubrik-branded Appliances and professional services, decreased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023. Sales of Rubrik-branded Appliances decreased by $5.1 million as we are transitioning sales of our Rubrik-branded Appliances from us to our contract manufacturers and no longer offer new perpetual licenses. We expect our other revenue as a percentage of total revenue to continue to decrease.

Current wording

Other revenue, which consists primarily of sales of Rubrik-branded Appliances and professional services, decreased for the three and six months ended July 31, 2024. Sales of Rubrik-branded Appliances decreased by $3.8 million and $8.9 million for the three and six months ended July 31, 2024, respectively, as we are transitioning sales of our Rubrik-branded Appliances from us to our contract manufacturers and no longer offer new perpetual licenses. We expect our other revenue as a percentage of total revenue to continue to decrease.

Previous wording

Cost of subscription revenue increased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023, primarily due to $35.2 million in stock-based compensation expense we recognized as a result of the completion of our IPO, an increase in $11.1 million in hosting costs due to the development and launch of more SaaS products, and an increase of $4.4 million from growth in our customer support organization.

Current wording

Cost of subscription revenue increased for the three and six months ended July 31, 2024 primarily due to the recognition of stock-based compensation expense of $5.4 million and $40.7 million, respectively, after and as a result of the completion of our IPO, an increase in $12.7 million and $23.9 million, respectively, in hosting costs due to the development and launch of more SaaS products, and an increase of $2.4 million and $6.8 million, respectively, from growth in our customer support organization.

Previous wording

Cost of maintenance revenue increased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023, primarily due to $2.5 million in stock-based compensation expense we recognized as a result of the completion of our IPO, partially offset by a decrease in our customer support organization costs relating to maintenance revenue as we no longer offer new perpetual licenses and as existing maintenance customers adopt RSC subscription offerings.

Current wording

Cost of maintenance revenue decreased for the three months ended July 31, 2024 primarily due to a decrease in our customer support organization costs relating to maintenance revenue as we no longer offer new perpetual licenses and as existing maintenance customers adopt RSC subscription offerings. Cost of maintenance revenue increased for the six months ended July 31, 2024 primarily due to $2.7 million in stock-based compensation expense we recognized after and as a result of the completion of our IPO, partially offset by a $1.8 million decrease in our customer support organization costs relating to maintenance revenue as we no longer offer new perpetual licenses and as existing maintenance customers adopt RSC subscription offerings.

Previous wording

Cost of other revenue increased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023, primarily due to $11.2 million in stock-based compensation expense we recognized as a result of the completion of our IPO, partially offset by a decrease in Rubrik-branded Appliances costs as we are transitioning the sale of Rubrik-branded Appliances from us to our contract manufacturers.

Current wording

Cost of other revenue decreased for the three months ended July 31, 2024 primarily due to a decrease in Rubrik-branded Appliances costs as we are transitioning the sale of Rubrik-branded Appliances from us to our contract manufacturers. Cost of other revenue increased for the six months ended July 31, 2024 primarily due to $12.5 million in stock-based compensation expense we recognized after and as a result of the completion of our IPO, partially offset by a decrease in Rubrik-branded Appliances costs of $8.4 million as we are transitioning the sale of Rubrik-branded Appliances from us to our contract manufacturers.

Previous wording

Subscription gross margin decreased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023, due to the stock-based compensation expense we recognized as a result of the completion of our IPO and an increase in hosting costs associated with our development and launch of more SaaS products.

Current wording

Subscription gross margin decreased for the three and six months ended July 31, 2024 due to the stock-based compensation expense we recognized after and as a result of the completion of our IPO and an increase in hosting costs associated with our development and launch of more SaaS products.

Previous wording

Research and development expenses increased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023. Employee compensation and related expenses increased by $237.4 million due to $224.0 million of stock-based compensation expense we recognized as a result of the completion of our IPO and increases in headcount as we continued to develop new products and enhance the functionalities of our existing products.

Current wording

Research and development expenses increased for the three and six months ended July 31, 2024. Employee compensation and related expenses increased by $34.8 million and $272.2 million, respectively, due to $27.7 million and $251.7 million, respectively, of stock-based compensation expense we recognized after and as a result of the completion of our IPO and increases in headcount as we continued to develop new products and enhance the functionalities of our existing products.

Previous wording

Sales and marketing expenses increased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023. Employee compensation and related expenses increased by $260.1 million due to $239.7 million of stock-based compensation expenses we recognized as a result of the completion of our IPO and increases in headcount.

Current wording

Sales and marketing expenses increased for the three and six months ended July 31, 2024. Employee compensation and related expenses increased by $45.4 million and $305.5 million, respectively, due to $33.7 million and $273.4 million, respectively, of stock-based compensation expense we recognized after and as a result of the completion of our IPO and increases in headcount.

Previous wording

Interest income increased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023 due to higher cash, cash equivalents, and investment balances and higher interest rates.

Current wording

Interest income increased for the three and six months ended July 31, 2024 due to higher cash, cash equivalents, and investment balances and higher interest rates.

Previous wording

Interest expense increased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023 primarily due to our Prior Credit Facility and Amended Credit Facility (each as defined below).

Current wording

Interest expense increased for the three and six months ended July 31, 2024 primarily due to our Prior Credit Facility and Amended Credit Facility (each as defined below).

Previous wording

Our income tax expense decreased for the three months ended April 30, 2024 as compared to the three months ended April 30, 2023, primarily due to several of our foreign subsidiaries making an election in the current year to be treated as U.S. branches for federal income tax purposes effective in fiscal 2024. Our effective tax rate may fluctuate significantly on a quarterly basis and could be adversely affected to the extent that earnings are lower than anticipated in countries that have lower statutory tax rates and higher than anticipated in countries that have higher statutory tax rates. In addition, tax authorities may challenge our transfer pricing policies, resulting in a higher effective tax rate.

Current wording

Our effective tax rate may fluctuate significantly on a quarterly basis and could be adversely affected to the extent that earnings are lower than anticipated in countries that have lower statutory tax rates and higher than anticipated in countries that have higher statutory tax rates. In addition, tax authorities may challenge our transfer pricing policies, resulting in a higher effective tax rate.

Previous wording

Our billings grow with new business growth. The majority of our billings are driven by invoicing our customers for multi-year commitments. However, this may evolve as customers have opted to, and may continue to opt to, pay us on an annual basis based on products purchased due to the growth in our SaaS product offerings and the uncertain macroeconomic environment. In addition, our billings are subject to seasonality, with billings in the fourth quarter being substantially higher than in the other three quarters. As of April 30, 2024, we had cash, cash equivalents, and short-term investments of $606.3 million. Our cash equivalents and investments primarily consist of money market funds, U.S. treasuries, commercial paper, corporate bonds, and U.S. government agencies securities. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $(2,414.6) million as of April 30, 2024. We expect to continue to incur operating losses, and our operating cash flows may fluctuate between positive and negative amounts for the foreseeable future due to the investments we intend to make as described above. As a result, we may require additional capital resources to execute strategic initiatives to grow our business.

Current wording

Our billings grow with new business growth. The majority of our billings are driven by invoicing our customers for multi-year commitments. However, this may evolve as customers have opted to, and may continue to opt to, pay us on an annual basis based on products purchased due to the growth in our SaaS product offerings and the uncertain macroeconomic environment. In addition, our billings are subject to seasonality, with billings in the fourth quarter being substantially higher than in the other three quarters. As of July 31, 2024, we had cash, cash equivalents, and short-term investments of $601.3 million. Our cash equivalents and investments primarily consist of money market funds, U.S. treasuries, commercial paper, corporate bonds, and U.S. government agencies securities. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $(2,591.5) million as of July 31, 2024. We expect to continue to incur operating losses, and our operating cash flows may fluctuate between positive and negative amounts for the foreseeable future due to the investments we intend to make as described above. As a result, we may require additional capital resources to execute strategic initiatives to grow our business.

Previous wording

The following table summarizes our cash flows for the periods presented (in thousands):

Current wording

The following table summarizes our cash flows for the periods presented:

Previous wording

Our largest source of operating cash is payments received from our customers. We typically invoice our customers in advance for multi-year contracts. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets in deferred revenue. We generally experience seasonality based on when we enter into agreements with our customers. Given the seasonality in our business, the operating cash flow benefit from increased collections from our customers generally occurs in the subsequent quarter after billing. We expect seasonality, timing of billings, and collections from our customers to have a material impact on our cash flow from operating activities from period to period. Our primary uses of cash from operating activities are for employee compensation and related expenses, sales commissions, fees for third-party professional services, colocation and hosting costs, marketing programs, and discretionary cash payments of our debt interest expense pursuant to the terms of our Amended Credit Facility and prepayments of other spend. Our cash flow from operating activities may fluctuate due to the timing of cash payments received from our customers and payments relative to expenses.

Current wording

Our largest source of operating cash is payments received from our customers. We typically invoice our customers in advance for multi-year contracts. Therefore, a substantial source of our cash is from such prepayments, which are included on our condensed consolidated balance sheets in deferred revenue. We generally experience seasonality based on when we enter into agreements with our customers. Given the seasonality in our business, the operating cash flow benefit from increased collections from our customers generally occurs in the subsequent quarter after billing. We expect seasonality, timing of billings, billings terms, and collections from our customers to have a material impact on our cash flow from operating activities from period to period. Our primary uses of cash from operating activities are for employee compensation and related expenses, sales commissions, fees for third-party professional services, colocation and hosting costs, marketing programs, and discretionary cash payments of our debt interest expense pursuant to the terms of our Amended Credit Facility and prepayments of other spend. Our cash flow from operating activities may fluctuate due to the timing of cash payments received from our customers and payments relative to expenses.

Previous wording

For the three months ended April 30, 2024, net cash used in operating activities of $31.4 million resulted primarily from a net loss of $732.1 million, partially offset by $630.3 million of stock-based compensation, $20.4 million of amortization of deferred commissions, $9.7 million for non-cash interest related to debt, $7.2 million for depreciation and amortization, and $33.2 million of net cash inflow from changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $53.5 million increase in deferred revenue from increased billings and a $36.2 million decrease in accounts receivable. The cash inflow was partially offset by a $23.2 million increase in deferred commissions, a $22.1 million increase in accrued expenses and other liabilities, and a $13.9 million decrease in prepaid expenses and other assets.

Current wording

For the six months ended July 31, 2024, net cash used in operating activities of $58.5 million resulted primarily from a net loss of $909.0 million, partially offset by $735.3 million of stock-based compensation, $42.4 million of amortization of deferred commissions, $19.2 million for non-cash interest related to debt, $14.1 million for depreciation and amortization, and $39.6 million of net cash inflow from changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $95.3 million increase in deferred revenue from increased billings and a $17.7 million increase in accrued expenses and other liabilities. The cash inflow was partially offset by a $70.2 million increase in deferred commissions and a $4.8 million increase in accounts receivable.

Previous wording

For the three months ended April 30, 2023, net cash used in operating activities of $17.5 million resulted primarily from a net loss of $89.3 million, partially offset by $16.4 million of amortization of deferred commissions and $5.6 million for depreciation and amortization, and $49.0 million of net cash inflow from changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $72.0 million increase in deferred revenue from increased billings, a $22.2 million decrease in accounts receivables, and a $12.5 million decrease in prepaid expense and other assets. The cash inflow was partially offset by a $19.9 million increase in deferred commissions and $38.2 million increase in prepaid expenses and other assets.

Current wording

For the six months ended July 31, 2023, net cash used in operating activities of $24.2 million resulted primarily from a net loss of $170.4 million, partially offset by $36.1 million of amortization of deferred commissions, $11.6 million for depreciation and amortization, $6.0 million for non-cash interest related to debt, and $90.0 million of net cash inflow from changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $155.1 million increase in deferred revenue from increased billings and a $17.1 million decrease in prepaid expense and other assets. The cash inflow was partially offset by a $55.6 million increase in deferred commissions and $25.4 million decrease in accrued expenses and other liabilities.

Previous wording

For the three months ended April 30, 2024, net cash provided by investing activities of $40.7 million resulted from $89.1 million in proceeds from maturities and sales of investments, offset by $42.7 million in purchases of investments, $3.6 million in purchases of property and equipment, and $2.1 million in capitalized internal-use software.

Current wording

For the six months ended July 31, 2024, net cash used in investing activities of $315.5 million resulted from $449.3 million in purchases of investments, $6.2 million in purchases of property and equipment, and $4.5 million in capitalized internal-use software, offset by $144.5 million in proceeds from maturities and sales of investments.

Previous wording

For the three months ended April 30, 2023, net cash provided by investing activities of $5.0 million resulted from $83.0 million in proceeds from maturities and sales of investments, offset by $72.2 million in purchases of investments, $3.4 million in purchases of property and equipment, and $2.4 million in capitalized internal-use software.

Current wording

For the six months ended July 31, 2023, net cash used in investing activities of $22.2 million resulted from $149.8 million in purchases of investments, $7.9 million in purchases of property and equipment, and $4.6 million in capitalized internal-use software, offset by $140.1 million in proceeds from maturities and sales of investments.

Previous wording

For the three months ended April 30, 2024, net cash provided by financing activities of $362.2 million resulted primarily from $710.3 million in proceeds from our IPO, net of underwriting discounts and commissions, and $3.6 million from the exercise of stock options, partially offset by $350.4 million in taxes paid related to the net share settlement of equity awards that vested upon our IPO, and $0.8 million for payment of deferred offering costs.

Current wording

For the six months ended July 31, 2024, net cash provided by financing activities of $384.4 million resulted primarily from $815.2 million in proceeds from our IPO and underwriters' exercise of over-allotment option, net of underwriting discounts and commissions, and $3.7 million from the exercise of stock options, partially offset by $430.3 million in taxes paid related to the net share settlement of equity awards that vested since our IPO, and $3.5 million for payment of deferred offering costs.