Netskope (NTSK) risk factors, FY2026 10-K

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1. 01Ite m 3. Legal Proceedings
2. 02Market Information Common Stock
3. 03Use of Proceeds from Initial Public Offering of Common Stock
4. 04It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
5. 05We are redefining security and networking for the era of cloud and AI
6. 06In addition, in connection with the IPO, all outstanding shares of convertible preferred stock were automatically converted into 218,897,608 shares of Class B common stock
7. 07Key Factors Affecting Our Performance
8. 08Our Ability to Add New Customers. Our ability to grow our customer base is a key indicator of both our market penetration and the future opportunities available to us
9. 09Dollar-Based Net Retention Rate ("NRR")
10. 10Dollar-based net retention rate (1)
11. 11Gross Profit and Gross Margin
12. 12General and Administrative
13. 13Loss on Changes in Fair Value of Convertible Notes
14. 14Provision for Income Taxes
15. 15Non-GAAP Financial Measures
16. 16Non-GAAP Gross Profit and Non-GAAP Gross Margin
17. 17Non-GAAP Loss from Operations and Non-GAAP Operating Margin
18. 18Free Cash Flow and Free Cash Flow Margin
19. 19In September 2025, we completed our IPO, whereby we received net proceeds of approximately $992.2 million after deducting underwriting discounts and commissions. As of January 31, 2026, our principal source of liquidity includes cash, cash equivalents, and marketable securities aggregating to $1.2 billion
20. 20Our primary source of cash provided by operations is revenue. Our primary use of cash in our operating activities include payments for employee-related compensation, contract acquisition costs, outside services, and other corporate expenditures
21. 21Our primary use of cash for investing activities include purchases of property and equipment and marketable securities. Our primary source of cash provided by investing activities include sale and maturities of marketable securities
22. 22Our obligations under the Convertible Notes are guaranteed by each of our subsidiaries other than certain excluded subsidiaries. The Convertible Notes are senior, unsecured obligations and the guarantees are senior, unsecured obligations of our subsidiary guarantors
23. 23Holders of the Convertible Notes are also entitled to convert such Convertible Notes upon certain corporate transactions or if we call Convertible Notes for redemption following a change in tax law
24. 24(1) Compounded quarterly
25. 25Contractual Obligations and Commitments
26. 26Critical Accounting Policies and Estimates
27. 27We account for revenue contracts with customers in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when, or as, control of a promised service is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those services
28. 28the U.S. and global capital market conditions and overall economic conditions
29. 29Fair Value Assumptions of Convertible Notes
30. 30Following the IPO, the fair value of the Convertible Notes is measured using a single-scenario lattice model that incorporates the trading price of the Company's Class A common stock data, risk-free interest rate, and estimated credit spread
31. 31Recent Accounting Pronouncements
32. 32JOBS Act Accounting Election
33. 33Opinion on the Consolidated Financial Statements
34. 34Liabilities and Stockholders’ Equity (Deficit)
35. 35Commitments and contingencies (Note 7)
36. 36Adjustments to reconcile net loss to net cash provided by (used in)
37. 37Note 1 - Description of Business
38. 38In connection with the closing of the IPO, all shares of the Company's outstanding convertible preferred stock were automatically converted into a total of 218,897,608 shares of Class B common stock
39. 39Emerging Growth Company Status
40. 40Fair Value of Financial Instruments
41. 41Concentration of Credit Risk
42. 42The Company has not experienced any credit losses relating to its cash, cash equivalents, restricted cash, or marketable securities
43. 43As of January 31, 2026 , one channel partner represented approximately 14 % of the accounts receivable, net balance. As of January 31, 2025 , a different channel partner represented approximately 17 % of the accounts receivable, net balance
44. 44Concentration of Vendor Risk
45. 45Restricted cash consisted of amounts held as collateral in connection with certain facility lease agreements. The Company had restricted cash of $ 1.2 million as of January 31, 2026 and 2025, which is included in other assets, noncurrent in the consolidated balance sheets
46. 46Accounts Receivable and Allowances
47. 47Property and equipment, net is stated at cost less accumulated depreciation and amortization. Major improvements that extend the life, capacity or efficiency are capitalized, while maintenance and repairs are expensed as incurred
48. 48Capitalized Internal-Use Software Costs
49. 49Capitalized internal-use software costs are included in property and equipment, net in the consolidated balance sheets and are amortized on a straight-line basis over the estimated useful life into cost of revenue within the consolidated statements of operations
50. 50Capitalized Implementation Costs
51. 51Goodwill and Intangible Assets, Net
52. 52Impairment of Long-Lived Assets
53. 53The Company accounts for lease components and non-lease components as a single lease component. In addition, the Company does not recognize operating lease ROU assets and operating lease liabilities for leases with lease terms of 12 months or less
54. 54As a result of applying the fair value option, direct costs and fees related to the Convertible Notes were expensed as incurred and were not deferred. The Company has elected not to present interest expense on the Convertible Notes separately from the overall change in the fair value
55. 55Identify the contract(s) with a customer
56. 56Identify the performance obligations in the contract
57. 57Determine the transaction price
58. 58If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP
59. 59Recognize revenue when or as performance obligations are satisfied
60. 60Professional Services Revenue
61. 61Arrangements with Multiple Performance Obligations
62. 62Sales through Indirect Channels
63. 63Deferred Contract Acquisition Costs
64. 64Stock-Based Compensation Expense
65. 65Segment and Geographic Information
66. 66Net Loss per Share Attributable to Common Stockholders
67. 67loss is not allocated to the convertible preferred stock, restricted common stock, and early exercised stock options as the holders do not have a contractual obligation to share in the Company's losses
68. 68Recently Adopted Accounting Pronouncements
69. 69Recently Issued Accounting Pronouncements Not Yet Adopted
70. 70Note 3 - Fair Value Measurements
71. 71Level 1 - Assets and liabilities whose values are based on observable inputs such as quoted (unadjusted) prices in active markets for identical assets or liabilities
72. 72Level 3 - Assets and liabilities whose values are based on unobservable inputs that are supported by little or no market activity and that are significant to the overall fair value measurement
73. 73Cash Equivalents and Marketable Securities
74. 74Gross unrealized losses within accumulated other comprehensive income (loss) were immaterial as of January 31, 2026 and 2025 . There were no impairment charges due to credit losses during the fiscal years ended January 31, 2026, 2025, and 2024
75. 75The fair value of the Convertible Notes on their respective issuance dates was the same as the carrying amounts of $ 401.0 million for the 2028 Notes and $ 75.0 million for the 2029 Notes
76. 76Subscription revenue is recognized over time and accounted for 99 %, 99 % and 98 % of the Company's revenue for the fiscal years ended January 31, 2026, 2025, and 2024, respectively
77. 77Revenue from the United States, which is included within the Americas region in the table above, wa s $ 317.0 million, $ 250.6 million, and $ 205.2 million during the fiscal years ended January 31, 2026, 2025, and 2024, respectively
78. 78consideration for both completed and partially completed performance obligations that may not have been invoiced and such amounts have historically not been material
79. 79Remaining performance obligations represents the amount of contracted future revenue that has not yet been recognized, including both deferred revenue that has been invoiced and non-cancelable committed amounts that will be invoiced and recognized as revenue in future periods
80. 80The identifiable intangible assets primarily consisted of developed technology of $ 18.2 million and customer relationship of $ 1.2 million , with estimated useful lives of three years and two years , respectively. The developed technology and customer relationship were valued using the replacement cost approach
81. 81Transaction costs of $ 0.8 million were expensed as incurred as a component of general and administrative expense in the consolidated statement of operations for the fiscal year ended January 31, 2024
82. 82Amortization expenses related to acquired intangible assets were $ 15.8 million , $ 22.7 million, and $ 21.1 million for the fiscal years ended January 31, 2026, 2025, and 2024, respectively
83. 83Prepaid Expenses and Other Current Assets
84. 84Accrued Compensation and Benefits
85. 85Accrued Expenses and Other Current Liabilities
86. 86Weighted-average discount rate
87. 87If the Company elects to redeem the 2028 Notes in connection with certain tax events
88. 88If the Company elects to redeem the 2029 Notes in connection with certain tax events
89. 89The terms relating to Fundamental Change, negative covenants, and events of default under the 2029 Notes are substantially similar as those governing the 2028 Notes. Refer to 2028 Notes description above for a full summary of these terms
90. 90Upon the closing of the IPO, all previously issued and outstanding convertible preferred stock was automatically converted at a 1:1 ratio into an aggregate of 218,897,608 shares of Class B common stock
91. 91Classification of convertible preferred stock
92. 92Performance and Market-Based RSUs
93. 93The weighted-average grant date fair value of options granted to employees during the fiscal years ended January 31, 2026, 2025, and 2024, was $ 8.95 , $ 5.82 , $ 5.54 per share, respectively
94. 94Early Exercise of Stock Options
95. 952025 Employee Stock Purchase Plan
96. 96(a) State and local taxes in California, Illinois, and New York made up the majority (great than 50%) of the tax effect in this category
97. 97The Company indefinitely reinvests earnings from its foreign subsidiaries and therefore no deferred tax liability has been recognized on the basis difference created by such earnings. The Company has not provided foreign withholding taxes for any undistributed earnings of the foreign subsidiaries
98. 98The Company files federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. Due to the Company's net operating loss carryforwards, the income tax returns generally remain subject to examination by federal and most state and foreign tax authorities
99. 99The Company identifies its operating segments in accordance with ASC 280, Segment Reporting . Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the CODM to allocate resources and assess performance
100. 100Revenue disaggregation by geography is presented in Note 4, Revenue Recognition. No single country other than the United States represented 10% or more of the Company's total revenue during the fiscal years ended January 31, 2026, 2025, and 2024
101. 101Note 13 - Net Loss Per Share Attributable to Common Stockholders
102. 102Evaluation of Disclosure Controls and Procedures
103. 103Management’s Report on Internal Control over Financial Reporting
104. 104Changes in Internal Control over Financial Reporting
105. 105Inherent Limitations on Effectiveness of Controls
106. 106Securities Trading Plans of Directors and Officers
107. 107Item 10. Directors, Exec utive Officers and Corporate Governance
108. 108Item 11. Exec utive Compensation
109. 109ship of Certain Beneficial Owners and Management and Related Stockholder Matters
110. 110Item 13. Certain Relationships and Related Transactions, and Director Independence
111. 111Item 14. Pri ncipal Accounting Fees and Services
112. 112It em 15. Exhibits, Financial Statement Schedules
113. 113Financial Statement Schedules
114. 114+ Indicates management contract or compensatory plan