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Acquisitions
 9 Months Ended
Oct. 31, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Acquisitions
6. Acquisitions
Rezilion
On May 23, 2024 (the “Asset Acquisition Date”), the Company completed its acquisition of certain assets, primarily software intellectual property, of Rezilion Inc. and its subsidiary, Rezilion Ltd. (collectively, “Rezilion”) for approximately $7.3 million in cash.
The Rezilion transaction was accounted for as an asset acquisition because substantially all of the fair value of gross assets acquired were concentrated in the developed intellectual property. Acquisition-related direct transaction costs were capitalized as a component of the cost of the assets acquired.
On the Asset Acquisition Date, the fair value of the developed technology was $7.7 million including $0.4 million of acquisition-related direct costs. The developed technology acquired has an estimated useful life of three years.
Oxeye
On March 20, 2024 (the “Acquisition Date”), the Company completed the acquisition of Oxeye Security Limited (“Oxeye”), a cloud-native application security and risk management solution company based in Israel. The Company believes this acquisition will allow the Company to strengthen its product offerings.
The transaction was accounted for as a business combination. The Acquisition Date fair value of the consideration transferred consisted of the following (in thousands):
Closing cash consideration$16,737 
Cash held in escrow3,593 
Total consideration$20,330 
Total consideration includes $3.6 million deposited in an escrow account as partial security for post-closing indemnification claims made within 15 months of the Acquisition Date. As the Company is not the legal owner of the escrow account, it is not recorded on the condensed consolidated balance sheet as of October 31, 2024.
As part of the acquisition, there was also a holdback in the amount of $3.2 million (the “holdback”). The holdback will be paid to the two co-founders (the “founder holdback”) in three equal tranches of 33.3%. The first such payment will be paid if certain milestones are achieved on or before the first anniversary of the closing date, provided such founder is employed by the Company upon completion of the milestones. The second and third tranches will be paid provided such founder is employed by the Company on the second and third anniversaries of the closing dates, respectively. As the founder holdback arrangement represents compensation for post-combination services, the Company has excluded the entire $3.2 million from the purchase price to be allocated, and will recognize the amount as expense over the period of services rendered after factoring in the likelihood of achieving the milestones in the first year.
During the three months ended October 31, 2024, the milestones attached to the first payment tranche were achieved and $1.1 million was paid out to the two co-founders. The Company recorded $0.1 million and $1.1 million of the founder holdback in general and administrative expenses in its condensed consolidated statement of operations for the three and nine months ended October 31, 2024, respectively.
Acquisition related transaction costs were $1.2 million for the nine months ended October 31, 2024, and were recorded by the Company in general and administrative expenses in its condensed consolidated statement of operations.
The Company recorded the assets acquired and liabilities assumed at their estimated fair values, with the difference between the fair value of the net assets acquired and the purchase consideration reflected in goodwill. The total purchase price of $20.3 million was allocated using information available to the Company at the time of acquisition. The Company may continue to adjust the preliminary purchase price allocation after obtaining more information regarding asset valuations, liabilities assumed, tax-related items and revisions of preliminary estimates. During the three and nine months ended October 31, 2024, there were no measurement period adjustments identified and recorded.
The following table reflects the fair values of assets acquired and liabilities assumed (in thousands):
Cash and cash equivalents$120 
Developed technology16,276 
Goodwill8,055 
Prepaid expenses and other current assets121 
Accrued expenses and payroll(3,582)
Deferred tax liability (660)
Net assets acquired$20,330 
As of March 20, 2024, developed technology of the acquired business had an estimated useful life of three years. The fair value of the developed technology intangible asset was estimated using the replacement cost method, which utilizes assumptions for the cost to replace it, such as time and resources required, as well as a theoretical profit margin and opportunity costs. The goodwill is primarily attributed to the synergies expected to be realized following the acquisition. The goodwill is not deductible for Israeli income tax purposes.
Results of operations of the business acquired have been included in the Company’s condensed consolidated financial statements subsequent to the date of acquisition. The revenue and net income (loss) earned by the business acquired following the acquisition are not material to the Company’s condensed consolidated results of operations; and accordingly, pro forma financial statements have not been presented.