On June 10, 2021, the Company completed the acquisition of Sensu, Inc. (“Sensu”) a privately-held software company that is a leader in open source monitoring. The addition of Sensu is expected to accelerate the Company's observability strategy by providing customers with an affordable and scalable end-to-end solution for infrastructure and application monitoring.

The aggregate amount recorded as purchase consideration was $32.7 million, of which $8.6 million was paid or to be paid in cash, and $24.1 million was comprised of 1,123,697 shares of the Company’s common stock. The value of consideration assigned to such shares of common stock was based on the closing price of the Company’s common stock on the date of acquisition, or $21.49 per share.

Additionally, 71,644 shares of common stock were issued with a fair value of $21.49 per share at the time of grant and will be recorded as stock-based compensation expense. These shares are subject to risk of forfeiture which lapse in full 1.5 years after the acquisition date. The Company recorded stock-based compensation expense related to the vesting of the restricted common stock of

$0.2 million during the nine months ended October 31, 2022, and $0.3 million and $0.4 million during the three and nine months ended October 31, 2021, respectively. The Company recorded a credit to stock-based compensation expense for the three months ended October 31, 2022 of $0.3 million primarily due to the reversal of unvested restricted common stock recognized in prior periods. As of October 31, 2022, the remaining unrecognized stock-based compensation expense was $0.1 million and will be recognized over the remaining vesting period.

A portion of the consideration otherwise payable was held back by the Company as partial security for certain indemnification obligations to be released 12 months after the acquisition date, subject to reduction for any indemnification claims. The $0.5 million of consideration held back was released during the second quarter of fiscal 2023.

Certain stock options held by Sensu employees were assumed by the Company with a total fair value of $0.6 million and will be recognized as stock-based compensation expense over the remaining service period. See Note 9 for more details on the Sensu options assumed.

The acquisition was accounted for as a business combination and the total purchase consideration was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date and the excess was recorded as goodwill.

The following table presents the purchase consideration allocation recorded in the Company’s condensed consolidated balance sheet as of the acquisition date (in thousands):


	Amount
Cash and cash equivalents	$	2,270
Accounts receivable	409
Other current assets	50
Acquired intangible assets	11,800
Goodwill	19,889
Accounts payable	(49)
Deferred revenue, current	(658)
Accrued expenses and other current liabilities	(143)
Deferred revenue, noncurrent	(99)
Other liabilities	(747)
Total acquisition consideration	$	32,722

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands):

Goodwill represents the future economic benefits arising from other assets that could not be individually identified and separately recognized, such as the acquired assembled workforce and synergies expected to be achieved from the integration of Sensu. In addition, goodwill represents the future benefits as a result of the acquisition that management expects to enhance the Company’s product available to both new and existing customers and increase the Company’s market position. Goodwill is not deductible for tax purposes.

The results of operations of Sensu from the date of acquisition have been included in the Company’s condensed consolidated financial statements. Pro forma revenue and results of operations have not been presented because the historical results of Sensu are not material to the Company’s condensed consolidated financial statements in any period presented.

On May 24, 2021, the Company completed the acquisition of DF Labs S.p.A. (“DFLabs”), a privately-held Italian corporation and a leader in security orchestration, automation and response (“SOAR”) technology. The combination of the Company’s Cloud SIEM and DFLabs' solution will provide customers with comprehensive cloud-native security intelligence solutions.

The aggregate amount recorded as purchase consideration was $41.7 million, of which $35.3 million was paid in cash, and $6.4 million was comprised of 334,815 shares of the Company’s common stock. The value of consideration assigned to such shares of common stock was based on the closing price of the Company’s common stock on the date of acquisition, or $18.97 per share.

Additionally, 143,492 shares of common stock were issued with a fair value of $18.97 per share at the time of grant and will be recorded as stock-based compensation. These shares are subject to risk of forfeiture, which lapse in full 2.0 years after the acquisition date. The Company recorded stock-based compensation expense related to the vesting of the restricted common stock of $0.3 million and $1.0 million during the three and nine months ended October 31, 2022, respectively, and $0.3 million and $0.6 million during the three and nine months ended October 31, 2021, respectively. As of October 31, 2022, the remaining unrecognized stock-based compensation expense was $0.8 million and will be recognized over the remaining vesting period.

A portion of the consideration otherwise payable was placed into escrow as partial security for certain indemnification obligations to be released 12 months after the acquisition date, subject to reduction for any indemnification claims. The Company released the consideration placed in escrow during the third quarter of fiscal 2023.

The following table presents the purchase consideration allocation recorded in the Company’s condensed consolidated balance sheet as of the acquisition date (in thousands):


	Amount
Cash and cash equivalents	$	782
Accounts receivable	430
Other current assets	111
Property and equipment	435
Acquired intangible assets	17,200
Goodwill	26,623
Other assets	178
Accounts payable	(262)
Deferred revenue, current	(340)
Accrued expenses and other current liabilities	(788)
Deferred revenue, noncurrent	(38)
Other liabilities	(2,654)
Total acquisition consideration	$	41,677

Goodwill represents the future economic benefits arising from other assets that could not be individually identified and separately recognized, such as the acquired assembled workforce of DFLabs and synergies expected to be achieved from the integration of DFLabs. In addition, goodwill represents the future benefits as a result of the acquisition that management expects to enhance the Company’s product available to both new and existing customers and increase the Company’s market position. Goodwill is not deductible for tax purposes.

The results of operations of DFLabs from the date of acquisition have been included in the Company’s condensed consolidated financial statements. Pro forma revenue and results of operations have not been presented because the historical results of DFLabs are not material to the Company’s condensed consolidated financial statements in any period presented.

The Company incurred acquisition-related expenses primarily for professional services of $3.8 million during the year ended January 31, 2022, which were recorded as general and administrative expenses in the consolidated statement of operations.


	October 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life (in years)
Developed technology	$	41,926	$	(29,872)	$	12,054	1.6
Customer relationships	3,000		(834)		2,166		3.7
Total	$	44,926	$	(30,706)	$	14,220


	January 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life (in years)
Developed technology	$	43,650	$	(20,046)	$	23,604	2.1
Customer relationships	3,000		(383)		2,617		4.4
Total	$	46,650	$	(20,429)	$	26,221

The Company recorded amortization expense of $3.5 million and $3.8 million during the three months ended October 31, 2022 and 2021, respectively, and $10.8 million and $8.4 million during the nine months ended October 31, 2022 and 2021, respectively. There was no impairment of intangible assets recorded for the nine months ended October 31, 2022 or 2021. There was no fully amortized intangible assets written off during the nine months ended October 31, 2022. Fully amortized intangible assets were written off in the amount of $1.0 million during the year ended January 31, 2022.