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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2021
 
OR
 
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM              TO
 
COMMISSION FILE NUMBER 001-35498
 ____________________________________________________

https://cdn.kscope.io/7880689d252cdd1ce2e390b06fbca659-splk-20210430_g1.jpg
Splunk Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________________
Delaware 86-1106510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

270 Brannan Street
San Francisco, California 94107
(Address of principal executive offices)
(Zip Code)
 
(415) 848-8400
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareSPLKThe NASDAQ Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

There were 163,917,375 shares of the Registrant’s Common Stock issued and outstanding as of June 2, 2021.



Table of Contents
TABLE OF CONTENTS
 
  Page No.
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 6.
 

1

Table of Contents
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Splunk Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)April 30, 2021January 31, 2021
Assets  
Current assets  
Cash and cash equivalents$1,845,198 $1,771,064 
Investments, current20,196 87,847 
Accounts receivable, net775,942 1,114,199 
Prepaid expenses and other current assets262,146 162,939 
Deferred commissions, current114,715 136,331 
Total current assets3,018,197 3,272,380 
Investments, non-current13,603 13,728 
Accounts receivable, non-current191,113 347,202 
Operating lease right-of-use assets245,756 356,296 
Property and equipment, net138,958 182,780 
Intangible assets, net191,314 206,153 
Goodwill1,334,888 1,334,888 
Deferred commissions, non-current78,504 69,637 
Other assets85,532 85,422 
Total assets$5,297,865 $5,868,486 
Liabilities and Stockholders’ Equity  
Current liabilities 
Accounts payable$48,849 $9,319 
Accrued compensation227,909 281,986 
Accrued expenses and other liabilities197,481 202,959 
Deferred revenue, current923,914 1,030,484 
Total current liabilities1,398,153 1,524,748 
Convertible senior notes, net2,329,193 2,302,635 
Operating lease liabilities226,019 330,970 
Deferred revenue, non-current86,188 110,418 
Other liabilities, non-current12,081 5,710 
Total non-current liabilities2,653,481 2,749,733 
Total liabilities4,051,634 4,274,481 
Commitments and contingencies (Note 3 and 4)
Stockholders’ equity  
Common stock: $0.001 par value; 1,000,000,000 shares authorized; 163,914,276 shares issued and outstanding at April 30, 2021, and 163,147,139 shares issued and outstanding at January 31, 2021
164 163 
Accumulated other comprehensive loss(748)(592)
Additional paid-in capital4,187,267 4,063,885 
Accumulated deficit(2,940,452)(2,469,451)
Total stockholders’ equity1,246,231 1,594,005 
Total liabilities and stockholders’ equity$5,297,865 $5,868,486 

The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Table of Contents
Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three Months Ended April 30,
(In thousands, except per share amounts)20212020
Revenues
Cloud services$193,958 $112,152 
License143,281 148,385 
Maintenance and services164,812 173,540 
Total revenues502,051 434,077 
Cost of revenues (1)
Cloud services88,085 53,490 
License4,290 6,066 
Maintenance and services 79,531 69,061 
Total cost of revenues171,906 128,617 
Gross profit330,145 305,460 
Operating expenses (1)
Research and development247,198 192,124 
Sales and marketing 356,108 319,224 
General and administrative162,186 82,724 
Total operating expenses765,492 594,072 
Operating loss(435,347)(288,612)
Interest and other income (expense), net
Interest income379 6,475 
Interest expense(33,590)(24,437)
Other income (expense), net(1,223)(674)
Total interest and other income (expense), net(34,434)(18,636)
Loss before income taxes(469,781)(307,248)
Income tax provision (benefit)1,220 (1,669)
Net loss$(471,001)$(305,579)
Basic and diluted net loss per share$(2.89)$(1.94)
Weighted-average shares used in computing basic and diluted net loss per share163,169 157,534 
 _________________________
(1)    Amounts include stock-based compensation expense, as follows:
Cost of revenues$17,514 $13,202 
Research and development77,046 68,569 
Sales and marketing55,186 56,474 
General and administrative32,671 20,573 


The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents
Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
 Three Months Ended April 30,
(In thousands)20212020
Net loss$(471,001)$(305,579)
Other comprehensive income (loss)
Net unrealized gain (loss) on investments (net of tax)(156)2,685 
Foreign currency translation adjustments 679 
Total other comprehensive income (loss)(156)3,364 
Comprehensive loss$(471,157)$(302,215)

 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents
Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Three Months Ended April 30,
(In thousands)20212020
Cash flows from operating activities  
Net loss$(471,001)$(305,579)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization25,796 20,494 
Amortization of deferred commissions42,314 26,878 
Amortization of investment premiums (accretion of discounts), net50 (692)
Amortization of debt discount and issuance costs26,558 20,416 
Loss on lease termination52,524  
Non-cash operating lease costs2,136 10,531 
Stock-based compensation182,417 158,818 
Disposal of property and equipment 505 
Deferred income taxes(1,129)(901)
Changes in operating assets and liabilities:
Accounts receivable, net494,346 327,099 
Prepaid expenses and other assets (98,169)(4,846)
Deferred commissions(29,565)(22,215)
Accounts payable 22,838 7,336 
Accrued compensation(54,077)(97,709)
Accrued expenses and other liabilities6,422 (10,067)
Deferred revenue (130,800)(84,024)
Net cash provided by operating activities 70,660 46,044 
Cash flows from investing activities
Purchases of investments(20,221)(87,135)
Maturities of investments87,766 254,823 
Purchases of property and equipment(853)(14,756)
Capitalized software development costs(3,066)(3,548)
Other investment activities125 (2,375)
Net cash provided by investing activities 63,751 147,009 
Cash flows from financing activities
Proceeds from the exercise of stock options538 1,418 
Taxes paid related to net share settlement of equity awards(60,815)(49,228)
Net cash used in financing activities (60,277)(47,810)
Effect of exchange rate changes on cash and cash equivalents (1,389)
Net increase in cash and cash equivalents 74,134 143,854 
Cash and cash equivalents at beginning of period 1,771,064 778,653 
Cash and cash equivalents at end of period $1,845,198 $922,507 
Supplemental disclosures
Cash paid for income taxes$1,569 $1,534 
Cash paid for interest 8,014 
Non-cash investing and financing activities
Increase (decrease) in accrued purchases of property and equipment5,633 (1,639)
Vesting of early exercised options32 56 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 
Three Months Ended April 30,
(In thousands)20212020
Common stock
Balance, beginning of period$163 $157 
Vesting of restricted and performance stock units1 1 
Balance, end of period$164 $158 
Additional paid-in capital
Balance, beginning of period$4,063,885 $3,566,055 
Stock-based compensation182,417 158,818 
Capitalized software development costs1,211 1,776 
Issuance of common stock upon exercise of options538 1,418 
Vesting of early exercised options32 56 
Taxes paid related to net share settlement of equity awards(60,816)(49,228)
Balance, end of period$4,187,267 $3,678,895 
Accumulated other comprehensive loss
Balance, beginning of period$(592)$(5,312)
Unrealized gain (loss) from investments (net of tax)(156)2,685 
Net change in cumulative translation adjustments 679 
Balance, end of period$(748)$(1,948)
Accumulated deficit
Balance, beginning of period$(2,469,451)$(1,561,471)
Net loss(471,001)(305,579)
Balance, end of period$(2,940,452)$(1,867,050)
Total stockholders’ equity$1,246,231 $1,810,055 


The accompanying notes are an integral part of these condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(1)    Description of the Business and Significant Accounting Policies

Business

Splunk Inc. (“we,” “us,” “our”) provides innovative cloud and software solutions that deliver and operationalize insights from the data generated by digital systems. Data is produced by nearly every software application and electronic device across an organization and contains a real-time record of various activities, such as business transactions, customer and user behavior, and security threats. This data is growing significantly as a direct result of the prevalence and importance of digital systems used by today’s organizations. Our solutions help users remove barriers between insights derived from this data and actions organizations take to thrive in an era of unprecedented digital transformation. We were incorporated in California in October 2003 and reincorporated in Delaware in May 2006.

Fiscal Year

Our fiscal year ends on January 31. References to fiscal 2022, for example, refer to the fiscal year ending January 31, 2022.
 
Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet data as of January 31, 2021 was derived from audited financial statements, but does not include all disclosures required by GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 31, 2021.
 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to state fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal 2022.

Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods covered by the financial statements and accompanying notes. In particular, we make estimates with respect to the stand-alone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, uncollectible accounts receivable, the assessment of the useful life and recoverability of long-lived assets (property and equipment, goodwill and identified intangibles), the period of benefit for deferred commissions, stock-based compensation expense, the fair value of the liability component of the convertible debt, the fair value of assets acquired and liabilities assumed for business combinations, income taxes, the discount rate used for operating leases, and contingencies. Actual results could differ from those estimates.

COVID-19
 
The worldwide spread of COVID-19 has created significant global economic uncertainty and resulted in a global slowdown of economic activity which has decreased demand for a broad variety of goods and services, while also disrupting sales channels, marketing activities and general business operations for an unknown period of time until the pandemic has subsided. At this point, the extent to which COVID-19 may impact our future financial condition or results of operations is uncertain, and as of the date of issuance of these condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or adjust the carrying value of our assets or
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liabilities. These estimates may change, as new events occur and additional information is obtained, and will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our condensed consolidated financial statements.

Segments

We operate our business as one operating segment: the development and marketing of software solutions that enable our customers to gain real-time business insights by harnessing the value of their data. Our chief operating decision maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.

Principles of Consolidation
 
The accompanying unaudited condensed consolidated financial statements include the accounts of Splunk Inc. and its direct and indirect wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Foreign Currency

The functional currency of our foreign subsidiaries is the U.S. dollar. Foreign currency transaction gains and losses are included in “Other income (expense), net” on our condensed consolidated statements of operations and were not material for the three months ended April 30, 2021 and 2020.

Revenue Recognition

We generate revenues in the form of cloud services fees, software license and related maintenance fees, and other service fees. Cloud services are provided on a subscription basis and give our customers access to our cloud solutions, which include related customer support. Licenses for on-premises software (“software”) are either term or perpetual licenses and provide the customer with a right to use the software. When a term license is purchased, maintenance is bundled with the license for the term of the license period. Typically, when purchasing a perpetual license, a customer also purchases one year of maintenance for which we charge a percentage of the license fee. Other services include training and professional services that are not integral to the functionality of the licenses or cloud services.

Our contracts with customers often contain multiple performance obligations, which may include a combination of cloud services, software, related maintenance and support services, and professional services including training. We apply significant judgment in identifying and accounting for each performance obligation, as a result of evaluating the terms and conditions in contracts. For these contracts, we account for cloud services, software, maintenance and support, and other services as separate performance obligations as they are each distinct. Revenue is recognized when the performance obligations are satisfied. We satisfy our cloud service performance obligation over the associated contract term and recognize the associated revenue ratably over the term of the contract once access is provided to the customer, consistent with the pattern of benefit to the customer of such services. We satisfy our obligation and recognize revenue for software upon transfer of control of the software, which occurs at delivery of the license key to customers, or when the license term commences, if later. We satisfy our maintenance and support performance obligations and recognize revenue ratably over the maintenance and support term, consistent with the pattern of benefit to the customer of such services. Professional services and training are either provided on a time and material basis or over a contract term. We satisfy our professional services and training performance obligations and recognize the associated revenue as services are delivered. With respect to contracts that include customer acceptance provisions, we recognize revenue upon customer acceptance. Our policy is to record revenues net of any applicable sales, use or excise taxes.

Customers can purchase our products under different pricing options. Regardless of the pricing option selected, the consideration for our cloud services and license contracts is fixed and does not result in variable consideration. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on an observable standalone selling price when it is available, as well as other factors, including the price charged to customers, our discounting practices, and our overall pricing objectives, while maximizing observable inputs. In situations where pricing is highly variable, we estimate the SSP using the residual approach.

A receivable is recorded when we have an unconditional right to payment, either because we satisfied a performance obligation prior to receiving payment from the customer or we have a non-cancelable contract that has been invoiced in advance
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in accordance with our standard payment terms. Most of our multi-year cloud service and software contracts are invoiced annually. A receivable for multi-year cloud services is generally recorded upon invoicing. A receivable for multi-year software contracts is recorded upon delivery, whether or not invoiced, to the extent we have an unconditional right to receive payment in the future related to those licenses. The non-current portion of these receivables, primarily consisting of unbilled receivables from multi-year software contracts, is included in “Accounts receivable, non-current” on our condensed consolidated balance sheets.

Payment terms and conditions vary by contract type, although our standard payment terms generally require payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of payment, we have determined our contracts do not generally include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing.

Deferred revenue is recorded when we invoice a contract or deliver a license prior to recognizing revenue. It is comprised of balances related to maintenance, cloud services, training and professional services invoiced at the beginning of each service period, as well as licenses that we delivered prior to the license term commencing.

Recently Adopted Accounting Standards
 
We did not adopt any new accounting standards in the period ended April 30, 2021.

Recently Issued Accounting Pronouncements
 
StandardDescriptionEffective DateEffect on the Condensed Consolidated Financial Statements
(or Other Significant Matters)
Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815 - 40)This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity, which reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments will no longer have to be separated into debt and equity components. Convertible debt instruments will be reported as a single liability and convertible preferred stock will be reported as a single equity instrument. Similarly, the embedded conversion feature will no longer be amortized as interest expense over the life of the instrument. Instead, a convertible debt instrument will be accounted for wholly as debt unless 1) a convertible instrument contains features that require bifurcation as a derivative, or 2) a convertible debt instrument was issued at a substantive premium. Among other potential impacts, this ASU is expected to reduce reported interest expense, decrease reported net loss, and result in a reclassification of certain conversion feature balance sheet amounts from stockholder’s equity to liabilities as it relates to the convertible senior notes. This ASU also simplifies the diluted earnings per share calculations by requiring the use of the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations.First quarter of fiscal 2023.We are currently evaluating the impact of this standard on our condensed consolidated financial statements.

(2)    Investments and Fair Value Measurements
 
The carrying amounts of certain of our financial instruments including cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term maturities.
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Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels that are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
 
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
 
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The following table sets forth the fair value of our financial assets that were measured on a recurring basis:
 
 April 30, 2021January 31, 2021
(In thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:        
Money market funds$997,698 $ $ $997,698 $933,058 $ $ $933,058 
U.S. treasury securities 20,196  20,196  75,068  75,068 
Corporate bonds     12,779  12,779 
Reported as:        
Assets:        
Cash and cash equivalents   $997,698    $933,058 
Investments, current20,196 87,847 
Total   $1,017,894    $1,020,905 

Our investments in money market funds are measured at fair value on a recurring basis. These money market funds are actively traded and reported daily through a variety of sources. The fair value of the money market fund investments is classified as Level 1.

The following table presents our investments in available-for-sale debt securities as of April 30, 2021:
 
(In thousands)Amortized CostUnrealized GainsUnrealized LossesFair Value
Investments, current:
U.S. treasury securities$20,202 $ $(6)$20,196 

The following table presents our investments in available-for-sale debt securities as of January 31, 2021:
 
(In thousands)Amortized CostUnrealized GainsUnrealized LossesFair Value
Investments, current:
U.S. treasury securities$75,032 $36 $ $75,068 
Corporate bonds12,765 14  12,779 
Total available-for-sale investments$87,797 $50 $ $87,847 

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The following table presents the fair values and unrealized losses related to our investments in available-for-sale debt securities classified by length of time that the securities have been in a continuous unrealized loss position as of April 30, 2021:
 
Less than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. treasury securities$20,196 $(6)$ $ $20,196 $(6)

As of January 31, 2021, we did not have any investments in available-for-sale debt securities in an unrealized loss position.

The contractual maturities of our investments as of April 30, 2021 are as follows (in thousands):
 
Due within one year$20,196 
Total$20,196 

Investments with maturities of less than 12 months from the balance sheet date are classified as current assets, which are available for use to fund current operations. Investments with maturities greater than 12 months from the balance sheet date are classified as non-current assets.

Convertible Senior Notes

Refer to Note 7 “Convertible Senior Notes” for details regarding the fair value of our convertible senior notes.

Equity Investments

Our equity investments are included in “Investments, non-current” on our condensed consolidated balance sheets. The following table provides a summary of our equity investments:
 
(In thousands)April 30, 2021January 31, 2021
Equity investments without readily determinable fair values$9,744 $10,244 
Equity investments under the equity method of accounting3,859 3,484 
Total$13,603 $13,728 


(3)    Commitments and Contingencies
 
Legal Proceedings
 
A putative class action lawsuit alleging violations of the federal securities laws was filed on December 4, 2020 in the U.S. District Court for the Northern District of California (the “Court”) against us, our CEO and our CFO. The initial complaint alleged violations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for allegedly making materially false and misleading statements regarding our financial guidance and asserted a putative class period of October 21, 2020 to December 2, 2020. On March 16, 2021, the Court appointed lead plaintiff and lead plaintiff counsel in the case. On June 7, 2021, the lead plaintiff filed an amended complaint which expands the putative class period to run from March 26, 2020 to December 2, 2020 and alleges that defendants made materially false and misleading statements regarding our marketing efforts, hiring practices, and retention of personnel. The lead plaintiff seeks unspecified monetary damages and other relief.

Several derivative lawsuits related to the securities class action were filed in February, March, and April 2021 in the U.S. District Court for the Northern District of California and California Superior Court, San Francisco County. The lawsuits name our CEO, our CFO, and many of our board members as defendants, and the company as a nominal defendant. The lawsuits allege claims for breach of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control, and gross mismanagement against the defendants, and claims for contribution under Sections 10(b) and 21D of the Exchange Act against only our CEO and CFO. The plaintiffs seek unspecified monetary damages and other relief on behalf of the company. The court
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has stayed the action in the Northern District of California pursuant to stipulation of the parties until after a ruling on the anticipated motion to dismiss the federal securities case and the parties have also stipulated to a stay in the state-court actions.

We are also subject to certain routine legal and regulatory proceedings, as well as demands and claims that arise in the normal course of our business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. In our opinion, resolution of any pending claims (either individually or in the aggregate) is not expected to have a material adverse impact on our condensed consolidated results of operations, cash flows or financial position, nor is it possible to provide an estimated amount of any such loss. However, depending on the nature and timing of any such dispute, an unfavorable resolution of a matter could materially affect our future financial position, results of operations or cash flows, or all, in a particular period.

Indemnification Arrangements
 
During the ordinary course of business, we may indemnify, hold harmless and agree to reimburse for losses suffered or incurred, our customers, vendors, and each of their affiliates for certain intellectual property infringement and other claims by third parties with respect to our offerings, in connection with our commercial license arrangements or related to general business dealings with those parties.

As permitted under Delaware law, we have entered into indemnification agreements with our officers, directors and certain employees, indemnifying them for certain events or occurrences while they serve as our officers or directors or those of our direct and indirect subsidiaries.
 
Claims and reimbursements under indemnification arrangements have not been material to our condensed consolidated financial statements; therefore, there is no accrual of such amounts as of April 30, 2021 and January 31, 2021. We are unable to estimate the maximum potential impact of these indemnifications on our future results of operations.

(4)    Leases
 
In April 2021, we entered into an agreement to terminate our lease of certain office space located in San Jose, CA and ceased use of the space as of April 30, 2021. As a result, the related right-of-use asset and leasehold improvements balances were written off and our lease liability was partially derecognized. In total, a $55.2 million loss was recognized during the three months ended April 30, 2021, which includes certain termination-related fees. The loss is included in “General and administrative” expenses on our condensed consolidated statement of operations, and the remaining payments of $16.7 million to be made in connection with the termination are included in “Accounts payable” on our condensed consolidated balance sheet. As of January 31, 2021, we had $155.5 million in related operating lease commitments which were reduced to $11.0 million as of April 30, 2021.

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(5)    Property and Equipment
 
Property and equipment are stated at cost, net of accumulated depreciation and amortization. These assets are depreciated and amortized using the straight-line method over their estimated useful lives. Property and equipment consisted of the following:
 
(In thousands)April 30, 2021January 31, 2021
Computer equipment and software$75,085 $70,628 
Furniture and fixtures28,626 33,142 
Leasehold and building improvements (1)
137,860 180,956 
Capitalized software development costs (2)
28,072 23,795 
Property and equipment, gross269,643 308,521 
Less: accumulated depreciation and amortization(130,685)(125,741)
Property and equipment, net$138,958 $182,780 
_________________________
(1)    Includes costs related to assets not yet placed into service of $25.4 million as of January 31, 2021. All assets were placed into service as of April 30, 2021.
(2)    Includes costs related to projects still under development of $14.5 million and $16.7 million, as of April 30, 2021 and January 31, 2021, respectively.

Depreciation and amortization expense of Property and equipment, net was $11.0 million and $5.8 million for the three months ended April 30, 2021 and 2020, respectively.

Geographic Information
 
The following table presents our long-lived assets, which consist of property and equipment, net of depreciation and amortization, and operating lease right-of-use assets by geographic region:
 
(In thousands)April 30, 2021January 31, 2021
United States$323,134 $476,575 
United Kingdom49,274 50,460 
Other International12,306 12,041 
Total long-lived assets$384,714 $539,076 

Other than each of the United States and the United Kingdom, no other individual country represented 10% or more of our total long-lived assets as of April 30, 2021 or January 31, 2021.

(6)    Goodwill and Intangible Assets

Goodwill
 
There was no impairment of goodwill during the three months ended April 30, 2021 or 2020.

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Intangible Assets
 
Intangible assets subject to amortization as of April 30, 2021 are as follows:
 
(In thousands, except useful life)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Remaining Useful Life
(in months)
Developed technology$273,349 $(137,155)$136,194 55
Customer relationships86,310 (33,153)53,157 38
Other acquired intangible assets7,420 (5,457)1,963 17
Total intangible assets subject to amortization$367,079 $(175,765)$191,314 

Intangible assets subject to amortization as of January 31, 2021 are as follows:
 
(In thousands, except useful life)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted-Average Remaining Useful Life
(in months)
Developed technology$273,349 $(127,072)$146,277 57
Customer relationships86,310 (28,778)57,532 41
Other acquired intangible assets7,420 (5,076)2,344 19
Total intangible assets subject to amortization$367,079 $(160,926)$206,153 

Amortization expense from acquired intangible assets was $14.8 million and $14.7 million for the three months ended April 30, 2021 and 2020, respectively.

The expected future amortization expense for acquired intangible assets as of April 30, 2021 is as follows:
 
Fiscal Period (In thousands)Expected Amortization Expense
Remaining fiscal 2022$39,340 
Fiscal 202349,964 
Fiscal 202443,408 
Fiscal 202531,182 
Fiscal 202617,058 
Thereafter10,362 
Total amortization expense$191,314 

(7)    Convertible Senior Notes
 
Convertible Senior Notes Due 2027
 
On June 5, 2020, we issued $1.27 billion aggregate principal amount of 1.125% Convertible Senior Notes due 2027 (the “2027 Notes”), including the exercise in full by the initial purchasers of the 2027 Notes of their option to purchase an additional $165.0 million principal amount of 2027 Notes. The 2027 Notes are general senior, unsecured obligations of Splunk. The total proceeds from the issuance of the 2027 Notes was $1.25 billion, net of initial purchaser discounts and other issuance costs.

The 2027 Notes will mature on June 15, 2027, unless earlier redeemed, repurchased or converted. The 2027 Notes will bear interest from June 5, 2020 at a rate of 1.125% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020.
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The initial conversion rate for the 2027 Notes is 3.9164 shares of our common stock per $1,000 principal amount of the 2027 Notes, which is equivalent to an initial conversion price of approximately $255.34 per share of our common stock, subject to adjustment upon the occurrence of certain specified events. The initial conversion price of the 2027 Notes represents a premium of approximately 35.0% to the volume weighted average price of our common stock on the Nasdaq Global Select Market of approximately $189.14 per share on June 2, 2020, which was the date the pricing of the 2027 Notes was determined.

Convertible Senior Notes Due 2023 and 2025
 
In September 2018, we issued $1.27 billion aggregate principal amount of 0.50% Convertible Senior Notes due 2023 (the “2023 Notes”), including the exercise in full by the initial purchasers of the 2023 Notes of their option to purchase an additional $165.0 million principal amount of 2023 Notes, and $862.5 million aggregate principal amount of 1.125% Convertible Senior Notes due 2025 (the “2025 Notes”), including the exercise in full by the initial purchasers of the 2025 Notes of their option to purchase an additional $112.5 million principal amount of 2025 Notes. The 2023 Notes and the 2025 Notes are general senior, unsecured obligations of Splunk. The total proceeds from the issuance of the 2023 Notes and the 2025 Notes was $2.11 billion, net of initial purchaser discounts and other issuance costs.

The 2023 Notes will mature on September 15, 2023, and the 2025 Notes will mature on September 15, 2025, in each case unless earlier redeemed, repurchased or converted. The 2023 Notes bear interest from September 21, 2018 at a rate of 0.50% per year and the 2025 Notes bear interest from September 21, 2018 at a rate of 1.125% per year, in each case payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2019.

The initial conversion rate for each of the 2023 Notes and 2025 Notes is 6.7433 shares of our common stock per $1,000 principal amount of each of the 2023 Notes and 2025 Notes, which is equivalent to an initial conversion price of approximately $148.30 per share of our common stock, subject to adjustment upon the occurrence of certain specified events. The initial conversion price of each of the 2023 Notes and 2025 Notes represents a premium of approximately 27.5% to the $116.31 per share closing price of our common stock on September 18, 2018, which was the date the pricing of the 2023 Notes and the 2025 Notes was determined.

Other Terms of the Notes

The 2023 Notes, 2025 Notes and 2027 Notes (together the “Notes”) will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding June 15, 2023, June 15, 2025 and December 15, 2026 for the 2023 Notes, 2025 Notes and 2027 Notes, respectively, only under the following circumstances:

during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2019 (and only during such fiscal quarter) for the 2023 Notes and the 2025 Notes and October 31, 2020 (and only during such fiscal quarter) for the 2027 Notes, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the relevant series of Notes on each applicable trading day;

during the five business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price (as defined in the indenture governing the relevant series of Notes) per $1,000 principal amount of the relevant series of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the relevant series of Notes on each such trading day;

if we call the relevant series of Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

upon the occurrence of specified corporate events as set forth in the relevant indenture.

On or after June 15, 2023, June 15, 2025 and December 15, 2026 for the 2023 Notes, 2025 Notes and 2027 Notes, respectively, until the close of business on the second scheduled trading day immediately preceding the relevant maturity date, holders of the relevant series of Notes may convert all or any portion of their Notes of such series, in multiples of $1,000 principal amount, regardless of the foregoing circumstances.

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Upon conversion, we may satisfy our conversion obligation by paying and/or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the relevant indenture. Upon any conversion of the Notes of a series, it is our current intent to settle the first $1,000 of conversion value of each $1,000 principal amount of such Notes in cash and the remaining conversion value, if any, in shares of common stock. If we undergo a fundamental change (as defined in the applicable indenture governing the relevant series of Notes), holders may require us to repurchase for cash all or any portion of their Notes of the relevant series at a fundamental change repurchase price equal to 100% of the principal amount of the relevant series of Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the relevant maturity date of a series of Notes or if we deliver a notice of redemption in respect of a series of Notes, we will, in certain circumstances, increase the conversion rate of the relevant series of Notes for a holder of such series who elects to convert its Notes of the applicable series in connection with such corporate event or notice of redemption, as the case may be. During the three months ended April 30, 2021, the conditions allowing holders of the Notes to convert were not met. The Notes are therefore not convertible and were classified as long-term debt on our condensed consolidated balance sheet as of April 30, 2021.

We may not redeem the 2023 Notes, 2025 Notes and 2027 Notes prior to September 20, 2021, September 20, 2022 and June 20, 2024, respectively. We may redeem for cash all or any portion of the 2023 Notes, 2025 Notes and 2027 Notes, at our option, on or after September 20, 2021, September 20, 2022, and June 20, 2024, respectively, in each case if the last reported sale price of our common stock has been at least 130% of the conversion price for the relevant series of Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the relevant series of Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the relevant redemption date.

Partial Repurchase of the 2023 Notes

On June 5, 2020, we used a portion of the net proceeds from the issuance of the 2027 Notes to repurchase $488.3 million aggregate principal amount of the 2023 Notes (the “2023 Notes Partial Repurchase”), leaving $776.7 million aggregate principal outstanding on the 2023 Notes immediately after the 2023 Notes Partial Repurchase. The 2023 Notes Partial Repurchase was not made pursuant to a redemption notice and constituted individually privately negotiated transactions. The holders of the repurchased 2023 Notes also invested in the 2027 Notes. For each holder, the 2023 Notes and the 2027 Notes exchanged were deemed to be substantially different as the present value of the cash flows under the terms of the 2027 Notes was at least 10% different from the present value of the remaining cash flows under the terms of the 2023 Notes and accordingly, the 2023 Notes Partial Repurchase was accounted for as a debt extinguishment. We used $691.6 million of the net proceeds from the issuance of the 2027 Notes to complete the 2023 Notes Partial Repurchase, of which $407.4 million and $283.6 million were allocated to the liability and equity components of the 2023 Notes, respectively, and $0.5 million was related to the payment of the interest accrued.

Accounting for the Notes

In accounting for the issuance of the Notes, we separated each series of the Notes into their respective liability and equity components. The carrying amounts of the liability components of the respective Notes were calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature. The carrying amounts of the equity components, representing the conversion option, were determined by deducting the fair value of the liability components from the par value of the respective Notes. This difference represents the debt discount that is amortized to interest expense over the respective terms of the relevant series of Notes using the effective interest rate method. The carrying amounts of the equity components representing the conversion options were $266.9 million, $237.2 million and $347.4 million for the 2023 Notes, the 2025 Notes and the 2027 Notes, respectively, which are recorded in additional paid-in capital and are not remeasured as long as they continue to meet the conditions for equity classification.

In accounting for the issuance costs related to the Notes, which includes initial purchaser discounts, we allocated the total amount incurred for the relevant series of the Notes to the liability and equity components based on the proportion of the proceeds allocated to the debt and equity components for that series. Issuance costs attributable to the liability component of the 2023 Notes, the 2025 Notes and the 2027 Notes were $10.4 million, $6.5 million and $14.2 million, respectively. The issuance costs allocated to the liability component are amortized to interest expense over the contractual terms of the 2023 Notes, the 2025 Notes and the 2027 Notes at an effective interest rate of 5.65%, 6.22% and 6.26%, respectively. Issuance costs attributable to the equity component of the 2023 Notes, the 2025 Notes and the 2027 Notes were $2.8 million, $2.5 million and
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$5.4 million, respectively, and are netted against the equity components representing the conversion option in additional paid-in capital.

The cash consideration of the 2023 Notes Partial Repurchase allocated to the liability component of the 2023 Notes was based on the fair value of the liability component of the 2023 Notes as of June 5, 2020 utilizing an effective discount rate of 6.25%. This rate was based on our estimated rate for a similar liability with the same maturity, but without the conversion option. To derive this effective discount rate, we observed the trading details of the 2023 Notes immediately prior to the repurchase date to determine the volatility of the 2023 Notes. We utilized the observed volatility to calculate the effective discount rate, which was adjusted to reflect the term of the remaining 2023 Notes. The cash consideration allocated to the equity component of the 2023 Notes was calculated by deducting the fair value of the liability component from the aggregate cash consideration and was recorded as a reduction to “Additional paid-in capital.” The gain on extinguishment was subsequently determined by comparing the allocated cash consideration with the carrying value of the liability component, which includes the proportionate amounts of unamortized debt discount and the remaining unamortized debt issuance costs.

The net carrying amount of the liability component of the 2023 Notes immediately prior to the repurchase was as follows:
June 5, 2020
(In thousands)2023 Notes Total2023 Notes Partial Repurchase
Principal$1,265,000 $488,339 
Unamortized debt discount(184,336)(71,161)
Unamortized debt issuance costs(7,194)(2,777)
Net carrying amount $1,073,470 $414,401 

The 2023 Notes Partial Repurchase resulted in a gain on extinguishment of convertible senior notes, which is included in “Other income (expense), net” on our consolidated statements of operations, and was calculated as follows:

(In thousands)2023 Notes Partial Repurchase
Net carrying amount of the liability component associated with the 2023 Notes Partial Repurchase$414,401 
Less: Cash consideration allocated to the liability component(407,449)
Gain from the 2023 Notes Partial Repurchase$6,952 

The net carrying amounts of the liability component for each series of Notes as of April 30, 2021 were as follows:
 
(In thousands)
2023 Notes (1)
2025 Notes2027 Notes
Liability component:
Principal amount$776,661 $862,500 $1,265,000 
Unamortized discount(83,761)(160,197)(310,679)
Unamortized issuance costs(3,269)(4,408)(12,654)
Net carrying amount $689,631 $697,895 $941,667 
_________________________
(1)    Reflects the impact of the 2023 Notes Partial Repurchase on June 5, 2020, as discussed below.
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The following tables sets forth the interest expense related to each series of Notes:
 
 Three Months Ended April 30,
(In thousands)20212020
2023 Notes:
Coupon interest expense$971 $1,581 
Amortization of debt discount (conversion option)7,956 12,418 
Amortization of debt issuance costs310 485 
Total interest expense related to the 2023 Notes$9,237 $14,484 
2025 Notes:
Coupon interest expense$2,426 $2,426 
Amortization of debt discount (conversion option)7,657 7,312 
Amortization of debt issuance costs211 201 
Total interest expense related to the 2025 Notes$10,294 $9,939 
2027 Notes:
Coupon interest expense$3,558 $ 
Amortization of debt discount (conversion option)10,016  
Amortization of debt issuance costs408  
Total interest expense related to the 2027 Notes$13,982 $ 

As of April 30, 2021, the total estimated fair values of the 2023 Notes, the 2025 Notes and the 2027 Notes were approximately $0.87 billion, $0.97 billion and $1.17 billion, respectively. The fair value was determined based on the closing trading price per $100 of the respective series of Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates. The fair value of the Notes is considered a Level 2 measurement as they are not actively traded.

Capped Calls

In connection with the issuance of the Notes, we entered into privately negotiated capped call transactions relating to each series of Notes with certain counterparties (the “Capped Calls”). The Capped Calls are expected to reduce potential dilution to our common stock upon conversion of the Notes of a given series and/or offset any cash payments that we are required to make in excess of the principal amount of converted Notes of such series, as the case may be, with such reduction and/or offset subject to a cap. The Capped Calls are subject to adjustment upon the occurrence of certain specified extraordinary events affecting us, including merger events, tender offers and announcement events. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions.

The following table sets forth other key terms and premiums paid for the Capped Calls related to each series of the Notes:
Capped Calls Entered into in Connection with the Issuance of the 2023 and 2025 NotesCapped Calls Entered into in Connection with the Issuance of the 2027 Notes
Initial strike price, subject to certain adjustments$148.30 $255.34 
Cap price, subject to certain adjustments $232.62 $378.28 
Total premium paid (in thousands)$274,275 $137,379 

For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of any series of Notes. As the Capped Calls qualify for a scope exception from derivative accounting for instruments that are both indexed to the
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issuer’s own stock and classified in stockholders’ equity in its statement of financial position, the premium paid for the purchase of the Capped Calls has been recorded as a reduction to “Additional paid-in capital” and will not be remeasured.

(8)    Stock Compensation Plans
 
The following table summarizes the stock option, restricted stock unit (“RSU”) and performance unit (“PSU”) activity under our 2012 Equity Incentive Plan during the three months ended April 30, 2021:
 
 Options OutstandingRSUs and PSUs
Outstanding
 SharesWeighted-
Average
Exercise
Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value (1)
Shares
   (in years)(in thousands) 
Balances as of January 31, 2021418,743 $11.37 5.85$64,342 11,236,903 
Additional shares authorized
Options exercised(43,831)12.45 
Options forfeited and expired(14,996)13.50 
RSUs and PSUs granted4,873,947 
RSUs and PSUs vested(1,175,114)
RSUs and PSUs forfeited and canceled(574,184)
Balances as of April 30, 2021359,916 $11.15 5.50$41,486 14,361,552 
Vested and expected to vest353,533 $11.15 5.46$40,752 13,326,150 
Exercisable as of April 30, 2021184,203 $10.96 3.68$21,267 
 _________________________
(1)    The intrinsic value is calculated as the difference between the exercise price of the underlying stock option award and the closing market price of our common stock as of April 30, 2021.

During the three months ended April 30, 2021 and 2020, upon each settlement date of our outstanding RSUs to current employees, RSUs were withheld to cover the required withholding tax, which was based on the value of the RSU on the settlement date as determined by the closing price of our common stock on the trading day of the applicable settlement date. The remaining shares were delivered to the recipient as shares of our common stock. The amount remitted to the tax authorities for the employees’ tax obligation was reflected as a financing activity on our condensed consolidated statements of cash flows. These shares withheld by us as a result of the net settlement of RSUs were not considered issued and outstanding, thereby reducing our shares outstanding used to calculate earnings per share. These shares were returned to the reserves and are available for future issuance under our 2012 Equity Incentive Plan. We may also require employees to sell a portion of the shares that they received upon the vesting of RSUs in order to cover any required withholding taxes.

During the three months ended April 30, 2021, we granted 427,900 PSUs to certain executives under our 2012 Equity Incentive Plan, which includes both PSUs awarded but not yet earned, as well as PSUs earned and eligible to vest. The number of PSUs granted that were earned and eligible to vest were determined after a one-year performance period, based on achievement of certain company financial performance measures and the recipient’s continued service with us. The number of shares of our stock to be received based on financial performance measures can range from 0% to 200% of the target amount. Compensation expense for PSUs with financial performance measures is measured using the fair value at the date of grant and recorded over the vesting period of three or four years under the graded-vesting attribution method, and may be adjusted over the vesting period based on interim estimates of performance against the pre-set objectives. Additionally, beginning in fiscal 2019, our PSUs granted contain an additional market performance measure that can increase the number of shares earned by up to an additional 50% of the shares received based on the financial performance measure.

On October 27, 2020, the Compensation Committee of our Board of Directors approved a modification to the performance thresholds of our fiscal 2021 PSU awards. We accounted for this change as a Type III modification under ASC 718 as the expectation of the achievement of certain performance conditions related to these awards changed from improbable to probable post-modification. As a result, we reversed $10.8 million of stock-based compensation expense previously recognized for these awards, during fiscal 2021. Post-modification stock-based compensation expense related to these awards
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will be recognized based on the modification date fair value over their remaining service period, under the graded-vesting attribution method.

The following table presents unrecognized compensation cost related to stock options, RSUs, PSUs and restricted stock awards (“RSA”) as of April 30, 2021:
 
Unrecognized Compensation Cost
(in thousands)
Weighted-Average Remaining Contractual Term
(in years)
Stock options$17,371 1.4
RSUs1,669,815 2.8
PSUs132,179 1.4
RSAs39,799 2.0
Total unrecognized compensation cost$1,859,164 

The following table summarizes our RSA activity during the three months ended April 30, 2021:
 
 Shares
Outstanding as of January 31, 2021485,683 
RSAs vested(105,045)
RSAs forfeited and canceled(751)
Outstanding as of April 30, 2021379,887 

The weighted-average grant date fair value of RSUs granted was $148.96 per share for the three months ended April 30, 2021. The weighted-average grant date fair value of PSUs granted was $157.33 per share for the three months ended April 30, 2021.

(9)    Revenues, Accounts Receivable, Deferred Revenue and Remaining Performance Obligations

Disaggregation of Revenues

The following table presents disaggregated revenues by major product or service type:
 
 Three Months Ended April 30,
(In thousands)20212020
Revenues
Cloud services$193,958 $112,152 
License143,281 148,385 
Maintenance and services164,812 173,540 
Total revenues$502,051 $434,077 

Revenues by geography are based on the shipping address of the customer. The following table presents our revenues by geographic region:
 
 Three Months Ended April 30,
(In thousands)20212020
United States$346,700 $283,132 
International155,351 150,945 
Total revenues$502,051 $434,077 

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Other than the United States, no other individual country exceeded 10% of total revenues during any of the periods presented.

The following table presents revenues by channel partners representing 10% or more of total revenues:
 
Three Months Ended April 30,