10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2015

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-35584

EXA CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	04-3139906
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

55 Network Drive

Burlington, MA 01803

(Address of Principal Executive Offices, Including Zip Code)

(781) 564-0200

(Registrant’s Telephone Number, Including Area Code)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

As of November 30, 2015, 14,625,975 shares of the registrant’s outstanding common stock, $0.001 par value per share, were outstanding.

EXA CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED October 31, 2015

TABLE OF CONTENTS

	Pages
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS		3
Condensed Consolidated Balance Sheets (Unaudited) as of October 31, 2015 and January 31, 2015		3
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) for the three and nine months ended October 31, 2015 and 2014		4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended October  31, 2015 and 2014		5
Notes to Condensed Consolidated Financial Statements (Unaudited)		6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		28
ITEM 4. CONTROLS AND PROCEDURES		28
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		29
ITEM 1A. RISK FACTORS		29
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		29
ITEM 6. EXHIBITS		30
SIGNATURES		31

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXA CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

	October 31, 2015			January 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	23,186		$	21,785
Accounts receivable		11,602			27,462
Prepaid expenses and other current assets		2,867			3,098
Total current assets		37,655			52,345
Property and equipment, net		11,194			6,961
Intangible assets, net		2,132			2,395
Deferred tax assets		261			260
Restricted cash		352			525
Other assets		729			567
Total assets	$	52,323		$	63,053
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,310		$	1,620
Accrued expenses		7,067			10,585
Current portion of deferred revenue		15,710			26,863
Current portion of capital lease obligations		2,987			2,390
Total current liabilities		28,074			41,458
Deferred revenue		122			38
Capital lease obligations		3,220			1,602
Deferred rent		2,049			472
Other long-term liabilities		523			592
Total liabilities		33,988			44,162
Commitments and contingencies (Note 9)
Stockholders’ equity :
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value; 30,000,000 shares authorized; 14,653,862 and 13,874,744 shares issued, respectively; 14,621,360 and 13,842,242 shares outstanding, respectively		15			14
Additional paid-in capital		91,106			88,181
Accumulated deficit		(72,394	)		(68,878	)
Treasury stock (32,502 common shares, at cost)		0			0
Accumulated other comprehensive loss		(392	)		(426	)
Total stockholders’ equity		18,335			18,891
Total liabilities and stockholders’ equity	$	52,323		$	63,053

The accompanying notes are an integral part of the consolidated financial statements

3

EXA CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited)

(in thousands, except share and per share data)

	Three Months Ended October 31,						Nine Months Ended October 31,
	2015			2014			2015			2014
Revenue:
License revenue	$	13,966		$	12,866		$	39,185		$	36,842
Project revenue		2,998			3,092			8,002			7,729
Total revenues		16,964			15,958			47,187			44,571
Operating expenses:
Cost of revenues		5,118			4,562			14,516			13,790
Sales and marketing		2,336			2,442			7,264			7,518
Research and development		6,143			5,462			18,265			15,968
General and administrative		3,456			3,171			9,849			9,510
Total operating expenses		17,053			15,637			49,894			46,786
(Loss) income from operations		(89	)		321			(2,707	)		(2,215	)
Other income (expense), net:
Foreign exchange gain (loss)		51			194			(172	)		325
Interest expense		(60	)		(88	)		(179	)		(265	)
Interest income		3			3			8			9
Other income, net		6			4			6			7
Total other income (expense), net		0			113			(337	)		76
(Loss) income before income taxes		(89	)		434			(3,044	)		(2,139	)
Provision for income taxes		(344	)		(214	)		(472	)		(15,870	)
Net (loss) income	$	(433	)	$	220		$	(3,516	)	$	(18,009	)
Net (loss) income per share:
Basic	$	(0.03	)	$	0.02		$	(0.24	)	$	(1.31	)
Diluted	$	(0.03	)	$	0.02		$	(0.24	)	$	(1.31	)
Weighted average shares outstanding used in computing net (loss) income per share:
Basic		14,610,479			13,822,400			14,484,563			13,701,380
Diluted		14,610,479			14,749,825			14,484,563			13,701,380
Comprehensive (loss) income:
Net (loss) income	$	(433	)	$	220		$	(3,516	)	$	(18,009	)
Foreign currency translation adjustments		6			(126	)		34			(160	)
Comprehensive (loss) income	$	(427	)	$	94		$	(3,482	)	$	(18,169	)

The accompanying notes are an integral part of the consolidated financial statements

4

EXA CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Nine Months Ended October 31,
	2015			2014
Cash flows provided by operating activities:
Net loss	$	(3,516	)	$	(18,009	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		2,487			2,157
Stock-based compensation expense		1,766			1,403
Deferred rent expense		472			(267	)
Deferred income taxes		4			15,209
Net change in operating assets and liabilities:
Accounts receivable		15,948			20,432
Prepaid expenses and other current assets		54			258
Other assets		11			(2	)
Accounts payable		694			(874	)
Accrued expenses		(2,946	)		(3,415	)
Other liabilities		(69	)		(23	)
Deferred revenue		(11,007	)		(18,942	)
Net cash provided by (used in) operating activities		3,898			(2,073	)
Cash flows used in investing activities:
Purchases of property and equipment		(1,571	)		(684	)
Change in restricted cash		173			—
Net cash used in investing activities		(1,398	)		(684	)
Cash flows used in financing activities:
Proceeds from stock option and warrant exercises		1,168			749
Payments of capital lease obligations		(2,131	)		(2,303	)
Net cash used in financing activities		(963	)		(1,554	)
Effect of exchange rate changes on cash and cash equivalents		(136	)		(498	)
Net increase (decrease) in cash and cash equivalents		1,401			(4,809	)
Cash and cash equivalents, beginning of period		21,785			28,753
Cash and cash equivalents, end of period	$	23,186		$	23,944
Supplemental cash flow disclosures:
Cash paid for interest	$	179		$	265
Cash paid for income taxes	$	1,214		$	1,282
Supplemental disclosure of non-cash investing activities:
Acquisition of equipment through capital leases	$	4,351		$	1,700
Construction costs funded by landlord tenant improvement allowance	$	554		$	—

The accompanying notes are an integral part of the consolidated financial statements

5

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in thousands except per share amounts)

1. Description of Business

Exa Corporation (the “Company” or “Exa”), a Delaware corporation, develops, sells and supports simulation software and services used primarily by vehicle manufacturers to enhance the performance of their products, reduce product development costs and improve the efficiency of their design and engineering processes. The Company’s solutions enable engineers and designers to augment or replace conventional methods of evaluating designs that rely on expensive and inefficient physical prototypes and test facilities with accurate digital simulations that are more useful, cost effective and timely. The Company’s simulation solutions enable customers to gain crucial insights about design performance early in the design cycle, reducing the likelihood of expensive redesigns and late-stage engineering changes, which result in cost savings and fundamental improvements in the development process. The Company is primarily focused on the ground transportation market, but is also exploring the application of its capabilities in the aerospace, oil and gas production, chemical processing, architecture, engineering and construction, power generation, biomedical and electronics industries.

Exa has offices and sells directly in the United States and through subsidiaries in France, Germany, Italy, Japan, Korea, China, and the United Kingdom. The Company also conducts business in Sweden, India, Brazil, Russia, Canada, Finland, Spain and Australia.

2. Summary of Significant Accounting Policies

Applicable Accounting Guidance

Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative United States generally accepted accounting principles (“GAAP”) as found in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Basis of Presentation

The interim financial data as of October 31, 2015 and for the three and nine months ended October 31, 2015 and 2014 are unaudited; however, in the opinion of the Company’s management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated balance sheet presented as of January 31, 2015 has been derived from the audited consolidated financial statements as of that date. The unaudited condensed consolidated financial statements presented herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Exa annual report on Form 10-K for the year ended January 31, 2015 filed with the Securities and Exchange Commission on March 24, 2015.

Reclassification

Certain prior year amounts have been reclassified to be consistent with current year classifications.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make significant estimates 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 the reported amounts of revenues and expenses during the reporting periods. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from management’s estimates if future events differ substantially from past experience, or other assumptions, which reasonable when made, do not turn out to be substantially accurate.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle, as a result of which more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein. However, in July 2015, the FASB approved a one-year

6

deferral that does not require adoption until calendar year 2018 (fiscal 2019 for the Company). The two permitted transition methods under the new standard are: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard when it becomes effective.

In June 2014, the FASB issued ASU 2014-12, Stock Compensation, which is a standards update on accounting for share-based payments when the terms of the award provide that a performance target could be achieved after a requisite service period. The standard is effective for annual periods beginning after December 31, 2015, and interim periods therein, with early adoption permitted. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under the new guidance, management will be required to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for interim periods therein. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

In April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The guidance clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. The standard will be effective for annual reporting periods beginning after December 15, 2016, and for interim periods therein. Early adoption is permitted. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

3. Computation of Net (Loss) Income Per Share

Net (loss) income per share has been computed using the weighted average number of shares of common stock outstanding during each period. Diluted amounts per share include the impact of the Company’s outstanding potential common shares, such as shares issuable upon exercise of in-the-money stock options or warrants, when dilutive. Potential common shares that are anti-dilutive are excluded from the calculation of diluted net (loss) income per common share.

The following summarizes the calculation of basic and diluted net (loss) income per share:

	Three Months Ended October 31,					Nine Months Ended October 31,
	2015			2014		2015			2014
Numerator:
Net (loss) income	$	(433	)	$	220	$	(3,516	)	$	(18,009	)
Denominator:
Weighted average common shares, basic		14,610,479			13,822,400		14,484,563			13,701,380
Dilutive effect of:
Options to purchase common and preferred stock		—			898,619		—			—
Warrants to purchase common stock		—			9,285		—			—
Restricted stock units		—			19,521		—			—
Weighted average common shares, diluted		14,610,479			14,749,825		14,484,563			13,701,380
Basic net (loss) income per share	$	(0.03	)	$	0.02	$	(0.24	)	$	(1.31	)
Diluted net (loss) income per share	$	(0.03	)	$	0.02	$	(0.24	)	$	(1.31	)

The table below represents outstanding options, restricted stock unit awards and warrants that were excluded from the computation of diluted net (loss) income per share for the periods indicated because including them would have had an anti-dilutive effect. All of the Company’s outstanding stock options, unvested restricted stock units and warrants were anti-dilutive for the three months ended October 31, 2015 and for the nine months ended October 31, 2015 and 2014 due to the net loss incurred by the Company.

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
Options, restricted stock unit awards and warrants to purchase common stock		2,514,955		1,633,635		2,514,955		2,785,477

7

4. Property and Equipment, net

Property and equipment, net consists of the following:

	October 31, 2015			January 31, 2015
Computer software and equipment	$	25,668		$	20,637
Office equipment and furniture		463			422
Leasehold improvements		2,652			2,593
Construction-in-process		1,009			—
Total property and equipment		29,792			23,652
Less: accumulated depreciation		(18,598	)		(16,691	)
Property and equipment, net	$	11,194		$	6,961

For the three and nine months ended October 31, 2015, depreciation expense was $871 and $2,224, respectively. For the three and nine months ended October 31, 2014, depreciation expense was $675 and $1,894, respectively. Included in computer software and equipment and office equipment and furniture is equipment held pursuant to capital leases with costs of $22,708 and $18,303 and accumulated depreciation of $14,023 and $12,736 as of October 31, 2015 and January 31, 2015, respectively.

In September 2015, the Company capitalized $4,656 of computer processor equipment for its high performance computing data center in New Jersey. The equipment is included in computer software and equipment and the purchase price (exclusive of sales tax of $305 that was paid in cash), is being financed over three years under an arrangement that qualifies for capital lease accounting treatment.

The construction-in-process balance as of October 31, 2015 primarily relates to furniture and equipment purchases and leasehold improvement construction for the Company’s corporate headquarter renovation in Burlington, Massachusetts. The renovation project is expected to be substantially complete by January 2016. See Notes 6 and 9.

5. Accrued Expenses

Accrued expenses consist of the following:

	October 31, 2015		January 31, 2015
Accrued payroll	$	1,729	$	1,695
Accrued commissions and bonuses		2,152		3,150
Sales and withholding taxes		793		2,427
Accrued income taxes payable		598		597
Legal and professional		657		275
Deferred rent, current portion		38		597
Other accrued expenses		1,100		1,844
Total accrued expenses	$	7,067	$	10,585

6. Deferred Rent

Payment escalations, rent holidays and lease incentives specified in the Company’s non-cancelable operating lease and hosting agreements are recognized on a straight-line basis over the terms of the agreements. The differences arising from straight-line expense recognition and cash payments are recorded as deferred rent in the accompanying consolidated balance sheets. Tenant leasehold improvement allowances received from landlords are recorded as deferred rent and are amortized as operating expense over the applicable lease terms.

8

Deferred rent consists of the following:

	October 31, 2015			January 31, 2015
Leasehold improvement incentive	$	1,234		$	308
Cumulative non-cash rent expense		853			761
Total deferred rent		2,087			1,069
Less: current portion included in accrued expenses		(38	)		(597	)
Deferred rent, net of current portion	$	2,049		$	472

As discussed in Note 9, the Company entered into an amendment to its corporate headquarter lease in Burlington, Massachusetts effective July 1, 2015. The amendment provided for a tenant improvement allowance of up to $1,681 to cover renovations being made to the Company’s leased space over the remainder of fiscal year 2016. As of October 31, 2015, the Company recorded $1,047 of the tenant improvement allowance as an increase to deferred rent for renovation costs incurred to date. Of these costs, the Company paid for approximately $493, and accordingly, recorded a receivable from the landlord for this amount which is included in other current assets in the accompanying consolidated balance sheet. The $554 balance of these costs was funded by the landlord and is recorded as construction-in-process within property and equipment, net in the accompanying consolidated balance sheet.

7. Fair Value Measurements

Financial instruments consist primarily of cash and cash equivalents, accounts receivable and capital lease obligations. As of October 31, 2015 and January 31, 2015, the carrying amounts of these instruments approximate their fair values. The estimated fair values have been determined from information obtained from market sources and management estimates.

In determining the fair value of its financial assets and liabilities, the Company uses various valuation approaches. ASC 820, Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement and that are based on management’s best estimate of inputs market participants would use for pricing the asset or liability at the measurement date, including assumptions about risk.

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of October 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	12,517	$	12,517	$	—	$	—

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of January 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	12,514	$	12,514	$	—	$	—

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

9

8. Acquired Intangible Assets

Intangible assets acquired in a business combination are recorded under the purchase method of accounting at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives.

The following table reflects the carrying value of intangible assets as of October 31, 2015:

	October 31, 2015
	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,373	)	$	2,132
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,411	)	$	2,132

The following table reflects the carrying value of intangible assets as of January 31, 2015:

	January 31, 2015
	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,110	)	$	2,395
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,148	)	$	2,395

Amortization expense of intangible assets was $88 for each of the three months ended October 31, 2015 and 2014 and $263 for each of the nine months ended October 31, 2015 and 2014.

9. Commitments and Contingencies

Legal Contingencies

From time to time the Company is involved in legal proceedings arising in the ordinary course of business. There is no litigation pending that could, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Guarantees and Indemnification Obligations

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any United States patent, or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification provisions is generally perpetual after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these agreements is unlimited.

Based on historical experience and information known as of October 31, 2015 and January 31, 2015, the Company has not recorded any liabilities for these guarantees and indemnities.

Operating Leases

Effective July 1, 2015, the Company entered into an amendment to the lease for its corporate headquarters space in Burlington, Massachusetts. The amendment extends the lease term, originally set to expire in March 2016, through March 2023 and reduces the leased space from 65,941 square feet to 44,241 square feet. The 21,700 square foot reduction primarily relates to first floor space that had been subleased by the Company to a subtenant, and under the terms of the amendment, the landlord assumed the sublease effective July 1, 2015. The amendment also provides for a tenant improvement allowance of up to $1,681 to cover renovations that are being made to the retained second floor space over the remainder of fiscal year 2016. Management believes that the renovated space will be suitable and adequate to meet the Company’s planned growth needs at its headquarters over the next several years.

In conjunction with the relinquishment of the first floor space, the amendment reduced the Company’s required security deposit letter of credit from $525 to $352. The reduction of the letter of credit is reflected as a change in restricted cash in the investing activity section of the accompanying consolidated statement of cash flows.

10

Effective August 1, 2015, the Company entered into an amendment to the lease for its office space located in Japan. The amendment extends the lease term, originally set to expire in November 2015, through November 2017 and increases the leased space from approximately 4,047 square feet to 7,512 square feet.

In conjunction with the purchase of additional computer processor equipment for its high performance computing data center in New Jersey described in Note 4, effective as of September 1, 2015, the Company’s hosting and support arrangement for that facility was expanded to account for the new equipment.

As of October 31, 2015, after taking into consideration the above amendments, total future minimum lease payments under non-cancelable lease arrangements are as follows:

Fiscal year ended January 31,
2016 (remainder as of October 31, 2015)	$	1,211
2017		4,711
2018		4,688
2019		4,209
2020		2,980
2021		2,086
Thereafter		3,942
	$	23,827

10. Stockholders’ Equity and Stock-Based Compensation

Warrants Exercised

In July 2015, Massachusetts Capital Resource Company exercised warrants to purchase 21,538 shares of common stock at a cash exercise price of $6.11 per share. The Company has no remaining outstanding warrants as of October 31, 2015.

Stock-Based Compensation Expense

The fair value of common stock service-based options for employees and directors is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used:

	Nine Months Ended October 31,
	2015			2014
Estimated dividend yield		0	%		0	%
Expected stock price volatility		36.8	%		47.4	%
Weighted-average risk-free interest rate		2.0	%		2.2	%
Expected life of options (in years)		6.23			6.25

The weighted-average grant date fair value per share for service-based stock options granted in the three and nine months ended October 31, 2015 was $4.14 and $4.21, respectively. The weighted average grant date fair value per share for service-based stock options granted in the three and nine months ended October 31, 2014 was $5.04 and $5.48, respectively.

For standard service-based stock options, the Company records stock-based compensation expense over the estimated service/vesting period. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.

Performance-based stock options are recognized as expense over the requisite service period when it becomes probable that performance measures triggering vesting will be met. Certain grants vested during the first quarter of fiscal year 2016 based on achieved performance metrics for fiscal year 2015. As of October 31, 2015, the Company concluded that it was probable that required metrics for certain performance-based grants would be achieved for fiscal year 2016. As a result, the Company recognized $228 in share-based compensation expense associated with these options.

11

Total stock-based compensation expense related to stock options and restricted stock units issued by the Company is as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
Cost of revenues	$	64	$	52	$	186	$	134
Sales and marketing		117		88		317		249
Research and development		265		200		691		547
General and administrative		215		193		572		473
Total	$	661	$	533	$	1,766	$	1,403

The total unrecognized compensation cost related to outstanding stock options is $4,224 at October 31, 2015. This amount is expected to be recognized over a weighted-average period of 2.45 years.

11. Income Taxes

For the three and nine months ended October 31, 2015, the Company’s income tax provision was $344 and $472, respectively. The provision for both periods primarily consists of the tax effects of foreign operating results and foreign withholding taxes. For the three and nine months ended October 31, 2014, the income tax provision was $214 and $15,870, respectively. The provision for the nine months ended October 31, 2014 includes a $14,506 non-cash charge to record a valuation allowance against the Company’s United States net deferred tax assets and a $700 non-cash write-off of state deferred tax assets.

In determining the realizability of the net United States federal and state deferred tax assets, the Company considers numerous factors including historical profitability, estimated future taxable income, prudent and feasible tax planning strategies and the industry in which it operates. Management reassesses the realization of the deferred tax assets each reporting period, which resulted in a valuation allowance against the full amount of the Company’s United States deferred tax assets in the first quarter of fiscal year 2015. To the extent that the financial results of the United States operations improve in the future and the deferred tax assets become realizable, the Company will reduce the valuation allowance through earnings.

The Company does not expect that its unrecognized tax benefit will change significantly within the next twelve months. The Company and one or more of its subsidiaries file United States federal income tax returns and tax returns in various state and foreign jurisdictions. With limited exceptions, the Company is no longer subject to federal, state, local or foreign examinations for years ending prior to January 31, 2011. However, carryforward attributes that were generated in tax years ending prior to January 31, 2012 may still be adjusted upon examination by state or local tax authorities if they either have been or will be used in a future period.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in the Company’s ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset its taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. During the first quarter of fiscal year 2015, management determined that the Company had experienced an ownership change for purposes of Section 382. This ownership change resulted in annual limitations to the amount of net operating loss carryforwards that can be utilized to offset future taxable income, if any, at the federal level. The Company’s management has determined that, as of October 31, 2015, it had not experienced another ownership change for purposes of Section 382. However, future transactions in the Company’s common stock could trigger an ownership change for purposes of Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset the Company’s taxable income, if any. Any such limitation, whether as the result of sales of common stock by the Company’s existing stockholders or sales of common stock by the Company, could have a material adverse effect on the Company’s results of operations in future years.

12. Geographic Information

Revenue by geographic area, attributed to individual countries based upon location of the external customer, is as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
United States	$	5,320	$	4,332	$	13,462	$	10,616
Japan		2,917		2,339		7,396		6,857
Germany		2,431		3,026		7,081		8,555
United Kingdom		1,700		1,220		5,403		3,609
France		1,768		2,361		5,387		6,597
Korea		1,464		1,319		4,170		3,974
Sweden		420		501		1,377		1,846
Other		944		860		2,911		2,517
Total	$	16,964	$	15,958	$	47,187	$	44,571

12

Net long-lived assets, consisting of net property and equipment, are subject to geographic risks because they are generally difficult to move and to effectively utilize in another geographic area in a reasonable time period and because they are relatively illiquid. Net long-lived assets by principal geographic areas were as follows:

	October 31, 2015		January 31, 2015
United States	$	10,449	$	6,080
France		421		590
Germany		122		132
Japan		139		91
Other		63		68
Total property and equipment, net	$	11,194	$	6,961

13

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Result of Operations appearing in our Annual Report on Form 10-K, filed with the SEC on March 24, 2015. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, assumptions and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s plans, estimates, assumptions and beliefs only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

As used herein, except as otherwise indicated by context, references to “we,” “us,” “our,” or the “Company” refer to Exa Corporation.

Overview

We develop, sell and support simulation software and services that manufacturers use to enhance the performance of their products, reduce product development costs and improve the efficiency of their design and engineering processes. Our solutions enable engineers and designers to augment or replace conventional methods of evaluating design alternatives that rely on expensive and inefficient physical prototypes and test facilities, such as wind tunnels used in vehicle design, with accurate digital simulations that are more useful and timely. Our simulation solutions enable our customers to gain crucial insights about design performance early in the design cycle, reducing the likelihood of expensive redesigns and late-stage engineering changes. As a result, our customers realize significant cost savings and fundamental improvements in their vehicle development process.

We currently focus primarily on the ground transportation market, including manufacturers in the passenger vehicle, highway truck, off-highway vehicle and train markets, as well as their suppliers. Over 125 manufacturers currently utilize our products and services, including 14 of the global top 15 passenger vehicle manufacturer groups. We are also beginning to explore other markets in which we believe the capabilities of our solutions have broad application, such as the aerospace, oil and gas production, chemical processing, architecture, engineering and construction, power generation, biomedical and electronics industries.

One of the most critical challenges for our customers in their vehicle development processes is measuring or predicting how a vehicle feature or a mechanical system will interact with air, water or other fluids. For example, developing vehicles with reduced aerodynamic drag is critical to achieving the improvements in fuel efficiency that are increasingly desired by customers and mandated by government regulations. Our core product, PowerFLOW, is an innovative software solution for simulating complex fluid flow problems, including aerodynamics, thermal management, and aeroacoustics, or wind noise. PowerFLOW relies upon proprietary technology that enables it to predict complex fluid flows with a level of reliability comparable to or better than physical testing. The combination of PowerFLOW’s accuracy and timeliness provides results that are superior to those of alternative computational fluid dynamics, or CFD, methods.

We derive our revenue primarily from the sale of our simulation software, using an annual capacity-based licensing model. Our customers usually purchase PowerFLOW simulation capacity under one-year licenses, with a minority utilizing multi-year arrangements. Simulation capacity may be purchased as software-only, to be run on the customer’s own computer hardware, or provided in the form of software-as-a-service, via our hosted ExaCLOUD or PowerFLOW OnDemand offerings. To introduce new customers to our simulation solutions, we typically perform fixed-price projects that include simulation services accessed via our hosted facilities, along with engineering and consulting services. Customers typically license our products for one application, such as aerodynamics, and over time expand to other applications such as thermal management or aeroacoustics. In our customer engagement model, our applications management teams engage with our customers in long-term relationships focused on identifying problems that we can help them solve, demonstrating the value of our solutions and ensuring that the customer achieves maximum benefit from them. In this process we interact continuously with our customers to improve our software and services and add new solutions, and at the same time deepen our knowledge of their industry.

14

During the nine months ended October 31, 2015, revenue growth was driven by continued deployment of our simulation solutions in the installed base as well as by the addition of new customers. Investments made in field resources over the past two fiscal years are yielding growth in both project and license revenue. The strengthening U.S. dollar, particularly against the Euro and yen, had a material negative impact on revenue performance as compared to the same period last year. The geographic mix of revenue outside of the Americas is consistent with historical trends but does reflect the impact of the weaker Euro and yen. During the nine months ended October 31, 2015, 73% of our revenue came from outside of the Americas as compared to 76% for the same period last year. Revenue for the nine months ended October 31, 2015 was $47.2 million, with growth of 5.9% over the same period a year ago and 15.8% when measured on a constant currency basis. See “— Non-GAAP Measures” below for information about how we calculate and use revenue on a constant currency basis.

As a percent of revenue, our total operating expenses for the nine months ended October 31, 2015 increased approximately 0.7% when compared to the same period last year. This reflects our investment in resources to drive top line growth, including sales, marketing and research and development. While the majority of our expense base is in the United States, we have field resources based in our international offices which provide some natural foreign exchange hedge. As a result, the strengthening dollar had a positive impact on total operating expenses when compared to the same period last year. For the nine months ended October 31, 2015, total operating expenses were $49.9 million, with growth of 6.6% over the same period a year ago and 12.5% when measured on a constant currency basis. See “— Non-GAAP Measures” below for information about how we calculate and use operating expenses on a constant currency basis.

As a percent of revenue, our loss from operations for the nine months ended October 31, 2015 was 0.7% higher than the same period last year, primarily as a result of the foreign currency impacts described above. Adjusted EBITDA for the nine months ended October 31, 2015, as described in the Non-GAAP Measures section below, was slightly improved at $1.5 million when compared to $1.3 million in the same period last year.

We ended the quarter with cash and cash equivalents of $23.2 million compared to $21.8 million as of January 31, 2015. This reflects strong accounts receivable collections activity and normal seasonal cash flows. Capital expenditures increased during the nine months ended October 31, 2015 over the same period last year, primarily due to $4.7 million of investments in computer processor equipment for our high performance computing data center in New Jersey and due to renovations to our headquarter office in Burlington, Massachusetts.

15

Results of Operations for the Three Months Ended October 31, 2015 and 2014

The following tables set forth, for the periods presented, data from our consolidated statements of operation, as well as that data as a percentage of revenues.

	Three Months Ended October 31,
(in thousands)	2015			2014
Revenue:
License revenue	$	13,966		$	12,866
Project revenue		2,998			3,092
Total revenues		16,964			15,958
Operating expenses: (1)
Cost of revenues		5,118			4,562
Sales and marketing		2,336			2,442
Research and development		6,143			5,462
General and administrative (2)		3,456			3,171
Total operating expenses		17,053			15,637
(Loss) income from operations		(89	)		321
Other income (expense), net:
Foreign exchange gain		51			194
Interest expense		(60	)		(88	)
Interest income		3			3
Other income, net		6			4
Total other income (expense), net		0			113
(Loss) income before income taxes		(89	)		434
Provision for income taxes		(344	)		(214	)
Net (loss) income	$	(433	)	$	220

(1) Amounts include stock-based compensation expense as follows:

	Three Months Ended October 31,
(in thousands)	2015		2014
Cost of revenues	$	64	$	52
Sales and marketing		117		88
Research and development		265		200
General and administrative		215		193
Total stock-based compensation expense	$	661	$	533

(2) Includes amortization expense related to intangible assets as follows:

	Three Months Ended October 31,
(in thousands)	2015		2014
General and administrative	$	88	$	88

16

	Three Months Ended October 31,
(as a percent of total revenue)	2015			2014
Revenue:
License revenue		82.3	%		80.6	%
Project revenue		17.7	%		19.4	%
Total revenues		100.0	%		100.0	%
Operating expenses:
Cost of revenues		30.2	%		28.6	%
Sales and marketing		13.8	%		15.3	%
Research and development		36.2	%		34.2	%
General and administrative		20.4	%		19.9	%
Total operating expenses		100.5	%		98.0	%
(Loss) income from operations		(0.5	)%		2.0	%
Other income (expense), net:
Foreign exchange gain		0.3	%		1.2	%
Interest expense		(0.4	)%		(0.6	)%
Interest income		0.0	%		0.0	%
Other income, net		0.0	%		0.0	%
Total other income (expense), net		0.0	%		0.7	%
(Loss) income before income taxes		(0.5	)%		2.7	%
Provision for income taxes		(2.0	)%		(1.3	)%
Net (loss) income		(2.6	)%		1.4	%

Due to rounding, totals may not equal the sum of line items in the table above.

Comparison of Three Months Ended October 31, 2015 and 2014

Revenue

	Three Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change			% Change
License revenue	$	13,966	$	12,866	$	1,100			8.5	%
Project revenue		2,998		3,092		(94	)		(3.0	)%
Total revenues	$	16,964	$	15,958	$	1,006			6.3	%

License revenue increased 8.5% from $12.9 million for the three months ended October 31, 2014 to $14.0 million for the three months ended October 31, 2015. The increase was driven by new license customers and by increased utilization of simulation capacity by existing customers. Two significant customers accelerated their consumption of simulation hours, resulting in the use of all of their respective contracted simulation capacity earlier than previously expected. Each of these customers entered into a contract renewal during the quarter ended October 31, 2015, pursuant to which we recognized an aggregate of $0.6 million of incremental license revenue during the period. Project revenue for the three months ended October 31, 2015 decreased by approximately $0.1 million, and was primarily attributable to negative fluctuations in foreign exchange rates compared with the same period a year ago.

Foreign exchange fluctuations, particularly the weakening of the Euro and the Japanese yen, negatively impacted total revenue in the three months ended October 31, 2015 by $1.2 million as compared to the three months ended October 31, 2014. On a constant currency basis, our total revenues in the three months ended October 31, 2015 increased 13.9% compared with the three months ended October 31, 2014.

17

Cost of revenues

	Three Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
Cost of revenues	$	5,118	$	4,562	$	556		12.2	%

Cost of revenues for the three months ended October 31, 2015 was $5.1 million, an increase of $0.6 million, or 12.2%, compared with $4.6 million during the three months ended October 31, 2014. As a percentage of revenues, cost of revenues increased to 30.2% for the three months ended October 31, 2015 compared to 28.6% for the three months ended October 31, 2014. The increase is attributable to $0.3 million of increased royalty costs associated with higher customer license levels and expanded use of an embedded sublicensed product, $0.2 million of increased personnel-related costs associated with the net addition of 8 new application engineers and merit-based compensation increases for existing personnel and $0.1 million of increased depreciation expense associated with expansions at our high performance computing data center in New Jersey.

Sales and marketing

	Three Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change			% Change
Sales and marketing	$	2,336	$	2,442	$	(106	)		(4.3	)%

Sales and marketing expenses for the three months ended October 31, 2015 were $2.3 million, a decrease of $0.1 million, or 4.3%, compared with $2.4 million during the three months ended October 31, 2014. As a percentage of revenues, sales and marketing expenses decreased to 13.8% for the three months ended October 31, 2015 compared to 15.3% for the three months ended October 31, 2014. Decreases of $0.3 million in personnel-related and travel costs were partially offset by an increase of $0.2 million in expenses associated with marketing programs and initiatives.

Research and development

	Three Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
Research and development	$	6,143	$	5,462	$	681		12.5	%

Research and development expenses for the three months ended October 31, 2015 were $6.1 million, an increase of $0.7 million, or 12.5%, compared to $5.5 million for the three months ended October 31, 2014. As a percentage of revenues, research and development expense increased to 36.2% for the three months ended October 31, 2015 compared to 34.2% for the three months ended October 31, 2014. Increased payroll and employee-related costs accounted for approximately $0.6 million of the increase, primarily as a result of the net addition of 14 new scientists and software engineers since the prior year period and merit-based compensation increases for existing personnel. The balance of the increase is primarily attributable to additional depreciation expense associated with expansions at our high performance computing data center in New Jersey.

General and administrative

	Three Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
General and administrative	$	3,456	$	3,171	$	285		9.0	%

General and administrative expenses for the three months ended October 31, 2015 were $3.5 million, an increase of $0.3 million, or 9.0%, compared to $3.2 million for the three months ended October 31, 2014. As a percentage of revenues, general and administrative expenses increased to 20.4% for the three months ended October 31, 2015 compared to 19.9% for the three months ended October 31, 2014. The increase is attributable to $0.1 million of moving, short term furniture rental and project management costs associated with our Burlington, Massachusetts headquarter renovation, $0.1 million of increased employee-related expenses and $0.1 million of other increased costs, including professional fees and depreciation expense.

18

Total other income (expense), net

	Three Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change			% Change
Total other income (expense), net	$	0	$	113	$	(113	)		100	%

Total other income (expense), net for the three months ended October 31, 2015 was $0 compared to total other income (expense), net of $0.1 million for the three months ended October 31, 2014. Total other income (expense), net consists primarily of foreign exchange gains and losses offset by interest expense associated with our capital lease obligations. The period-over-period change in total other income (expense), net is primarily attributed to foreign exchange fluctuations in the Euro and Japanese yen.

Provision for income taxes

	Three Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
Provision for income taxes	$	344	$	214	$	130		60.7	%

For the three months ended October 31, 2015 and 2014, our income tax provision was $0.3 million and $0.2 million, respectively. The provision for both periods primarily consists of the tax effects of foreign operating results and foreign withholding taxes.

In determining the realizability of the net United States federal and state deferred tax assets, we consider numerous factors including historical profitability, estimated future taxable income, prudent and feasible tax planning strategies and the industry in which it operates. Management reassesses the realization of the deferred tax assets each reporting period, which resulted in a valuation allowance against the full amount of our United States deferred tax assets in the first quarter of fiscal year 2015. To the extent that the financial results of the United States operations improve in the future and the deferred tax assets become realizable, we will reduce the valuation allowance through earnings.

We do not expect that our unrecognized tax benefit will change significantly within the next twelve months. We and one or more of our subsidiaries file United States federal income tax returns and tax returns in various state and foreign jurisdictions. With limited exceptions, we are no longer subject to federal, state, local or foreign examinations for years ending prior to January 31, 2011. However, carryforward attributes that were generated in tax years ending prior to January 31, 2012 may still be adjusted upon examination by state or local tax authorities if they either have been or will be used in a future period.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in our ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset its taxable income. Specifically, this limitation may arise in the event we undergo a cumulative change in ownership of more than 50% within a three-year period. During the first quarter of fiscal year 2015, our management determined that the Company had experienced an ownership change for purposes of Section 382. This ownership change resulted in annual limitations to the amount of net operating loss carryforwards that can be utilized to offset future taxable income, if any, at the federal level. Our management has determined that, as of October 31, 2015, we have not experienced another ownership change for purposes of Section 382. However, future transactions in our common stock could trigger an ownership change for purposes of Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our taxable income, if any. Any such limitation, whether as the result of sales of common stock by our existing stockholders or sales of common stock by us, could have a material adverse effect on our results of operations in future years.

19

Results of Operations for the Nine Months Ended October 31, 2015 and 2014

	Nine Months Ended October 31,
(in thousands)	2015			2014
Revenue:
License revenue	$	39,185		$	36,842
Project revenue		8,002			7,729
Total revenues		47,187			44,571
Operating expenses: (1)
Cost of revenues		14,516			13,790
Sales and marketing		7,264			7,518
Research and development		18,265			15,968
General and administrative (2)		9,849			9,510
Total operating expenses		49,894			46,786
Loss from operations		(2,707	)		(2,215	)
Other (expense) income, net:
Foreign exchange (loss) gain		(172	)		325
Interest expense		(179	)		(265	)
Interest income		8			9
Other income, net		6			7
Total other (expense) income, net		(337	)		76
Loss before income taxes		(3,044	)		(2,139	)
Provision for income taxes		(472	)		(15,870	)
Net loss	$	(3,516	)	$	(18,009	)

(1) Amounts include stock-based compensation expense as follows:

	Nine Months Ended October 31,
(in thousands)	2015		2014
Cost of revenues	$	186	$	134
Sales and marketing		317		249
Research and development		691		547
General and administrative		572		473
Total stock-based compensation expense	$	1,766	$	1,403

(2) Includes amortization expense related to intangible assets as follows:

	Nine Months Ended October 31,
(in thousands)	2015		2014
General and administrative	$	263	$	263

20

	Nine Months Ended October 31,
(as a percent of total revenue)	2015			2014
Revenue:
License revenue		83.0	%		82.7	%
Project revenue		17.0	%		17.3	%
Total revenues		100.0	%		100.0	%
Operating expenses:
Cost of revenues		30.8	%		30.9	%
Sales and marketing		15.4	%		16.9	%
Research and development		38.7	%		35.8	%
General and administrative		20.9	%		21.3	%
Total operating expenses		105.7	%		105.0	%
Loss from operations		(5.7	)%		(5.0	)%
Other (expense) income, net:
Foreign exchange (loss) gain		(0.4	)%		0.7	%
Interest expense		(0.4	)%		(0.6	)%
Interest income		0.0	%		0.0	%
Other income, net		0.0	%		0.0	%
Total other (expense) income, net		(0.7	)%		0.2	%
Loss before income taxes		(6.5	)%		(4.8	)%
Provision for income taxes		(1.0	)%		(35.6	)%
Net loss		(7.5	)%		(40.4	)%

Due to rounding, totals may not equal the sum of line items in the table above.

Comparison of Nine Months Ended October 31, 2015 and 2014

Revenue

	Nine Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
License revenue	$	39,185	$	36,842	$	2,343		6.4	%
Project revenue		8,002		7,729		273		3.5	%
Total revenues	$	47,187	$	44,571	$	2,616		5.9	%

License revenue increased 6.4% from $36.8 million for the nine months ended October 31, 2014 to $39.2 million for the nine months ended October 31, 2015. The increase was driven by new license customers and by increased utilization of simulation capacity by existing customers. Two significant customers accelerated their consumption of simulation hours, resulting in the use of all of their respective contracted simulation capacity earlier than previously expected. Each of these customers entered into a contract renewal during the quarter ended October 31, 2015, pursuant to which we recognized an aggregate of $0.6 million of incremental license revenue during the period. Project revenue increased by $0.3 million during the nine months ended October 31, 2015 compared to the nine months ended October 31, 2014 due to expanded sales and engineering efforts with new and existing customers.

Foreign exchange fluctuations, particularly the weakening of the Euro and the Japanese yen, negatively impacted total revenue in the nine months ended October 31, 2015 by $4.4 million as compared to the nine months ended October 31, 2014. On a constant currency basis, our total revenues in the nine months ended October 31, 2015 increased 15.8% compared with the nine months ended October 31, 2014.

21

Cost of revenues

	Nine Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
Cost of revenues	$	14,516	$	13,790	$	726		5.3	%

Cost of revenues for the nine months ended October 31, 2015 was $14.5 million, an increase of $0.7 million, or 5.3%, compared with $13.8 million during the nine months ended October 31, 2014. As a percentage of revenues, cost of revenues decreased slightly to 30.8% for the nine months ended October 31, 2015 compared to 30.9% for the nine months ended October 31, 2014. The period-over-period increase was almost entirely attributable to increased royalty costs of approximately $0.7 million associated with higher customer license levels and expanded use of an embedded sublicensed product.

Sales and marketing

	Nine Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change			% Change
Sales and marketing	$	7,264	$	7,518	$	(254	)		(3.4	)%

Sales and marketing expenses for the nine months ended October 31, 2015 were $7.3 million, a decrease of $0.3 million, or 3.4%, compared to $7.5 million for the nine months ended October 31, 2014. As a percentage of revenues, sales and marketing expenses decreased to 15.4% for the nine months ended October 31, 2015 compared to 16.9% for the nine months ended October 31, 2014. The decrease in sales and marketing expenses is primarily attributable to a $0.7 million decrease in payroll and employee-related costs, including reduced commission expense related to the timing of customer orders and lower travel expenses, and a $0.2 million decrease in consulting fees, offset by an increase of $0.6 million in costs related to marketing programs and initiatives.

Research and development

	Nine Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
Research and development	$	18,265	$	15,968	$	2,297		14.4	%

Research and development expenses for the nine months ended October 31, 2015 were $18.3 million, an increase of $2.3 million, or 14.4%, compared to $16.0 million for the nine months ended October 31, 2014. As a percentage of revenues, research and development expense increased to 38.7% for the nine months ended October 31, 2015 compared to 35.8% for the nine months ended October 31, 2014. Increased payroll and employee-related costs accounted for essentially all of the $2.3 million increase, primarily as a result of the net addition of 9 new scientists and software engineers since the prior year period and merit-based compensation increases for existing personnel.

General and administrative

	Nine Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change		% Change
General and administrative	$	9,849	$	9,510	$	339		3.6	%

General and administrative expenses for the nine months ended October 31, 2015 were $9.8 million, an increase of $0.3 million, or 3.6%, compared to $9.5 million for the nine months ended October 31, 2014. As a percentage of revenues, general and administrative expense decreased to 20.9% for the nine months ended October 31, 2015 compared to 21.3% for the nine months ended October 31, 2014. Increased payroll and employee-related costs accounted for approximately $0.4 million of the increase, which was partially offset by a decrease of $0.1 million related to internet service charges.

22

Total other (expense) income, net

	Nine Months Ended October 31,
(in thousands, except percentages)	2015			2014		Change			% Change
Total other (expense) income, net	$	(337	)	$	76	$	(413	)		543.4	%

Total other (expense) income, net for the nine months ended October 31, 2015 was $(0.3) million, compared to total other (expense) income, net of $0.1 million for the nine months ended October 31, 2014. Total other (expense) income, net consists primarily of foreign exchange gains and losses and interest expense associated with our capital lease obligations. The period-over-period change to total other expense (income), net is primarily attributed to foreign exchange fluctuations in the Euro and Japanese yen.

Provision for income taxes

	Nine Months Ended October 31,
(in thousands, except percentages)	2015		2014		Change			% Change
Provision for income taxes	$	472	$	15,870	$	(15,398	)		(97.0	)%

For the nine months ended October 31, 2015 and 2014, our income tax provision was $0.5 million and $15.9 million, respectively. The provision for the nine months ended October 31, 2015 primarily consists of the tax effects of foreign operating results and foreign withholding taxes. The provision for the nine months ended October 31, 2014 includes a $14.5 million non-cash charge to record a valuation allowance against the Company’s United States net deferred tax assets and a $0.7 million non-cash write-off of state deferred tax assets.

In determining the realizability of the net United States federal and state deferred tax assets, we consider numerous factors including historical profitability, estimated future taxable income, prudent and feasible tax planning strategies and the industry in which it operates. Management reassesses the realization of the deferred tax assets each reporting period, which resulted in a valuation allowance against the full amount of our United States deferred tax assets in the first quarter of fiscal year 2015. To the extent that the financial results of the United States operations improve in the future and the deferred tax assets become realizable, we will reduce the valuation allowance through earnings.

We do not expect that our unrecognized tax benefit will change significantly within the next twelve months. We and one or more of our subsidiaries file United States federal income tax returns and tax returns in various state and foreign jurisdictions. With limited exceptions, we are no longer subject to federal, state, local or foreign examinations for years prior to January 31, 2011. However, carryforward attributes that were generated in tax years ending prior to January 31, 2012 may still be adjusted upon examination by state or local tax authorities if they either have been or will be used in a future period.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in our ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset its taxable income. Specifically, this limitation may arise in the event we undergo a cumulative change in ownership of more than 50% within a three-year period. During the first quarter of fiscal year 2015, our management determined that the Company had experienced an ownership change for purposes of Section 382. This ownership change resulted in annual limitations to the amount of net operating loss carryforwards that can be utilized to offset future taxable income, if any, at the federal level. Our management has determined that, as of October 31, 2015, we have not experienced another ownership change for purposes of Section 382. However, future transactions in our common stock could trigger an ownership change for purposes of Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our taxable income, if any. Any such limitation, whether as the result of sales of common stock by our existing stockholders or sales of common stock by us, could have a material adverse effect on our results of operations in future years.

Non-GAAP Measures

From time to time we provide certain non-GAAP financial measures to investors as additional information in order to supplement our consolidated financial statements, which are presented in accordance with accounting principles generally accepted in the United States, or GAAP. The non-GAAP financial information presented here should be considered in conjunction with, and not as a substitute for, or superior to, the financial information presented in accordance with GAAP and should not be considered a measure of our liquidity. There are significant limitations associated with the use of non-GAAP financial measures. Further, these measures may differ from the non-GAAP information, even where similarly titled or used by other companies and therefore should not be used to compare our performance to that of other companies.

23

Revenue and total operating expenses on a constant currency basis. Our international operations generate and incur expenses that are denominated in foreign currencies, and changes in currency exchange rates can materially affect our consolidated results of operations. Our principal exposures are to fluctuations in exchange rates for the United States dollar versus the British pound, Chinese yuan, Euro, Japanese yen, and Korean won. To provide investors with information concerning underlying trends in our business, we disclose revenue and total operating expenses on a constant currency basis, which we define as GAAP revenue or operating expenses, adjusted to reverse the impact of changes in the exchange rates of the principal currencies in which our international operations generated revenue and incurred expenses. We calculate revenue and total operating expenses on a constant currency basis by converting revenue or operating expenses that were generated in the currencies specified above during the three and nine months ended October 31, 2015 to United States dollars at assumed exchange rates equal to the exchange rates in effect for such currencies during the corresponding period of the previous fiscal year, rather than the exchange rates actually in effect during the current fiscal year.

Adjusted EBITDA. We define Adjusted EBITDA as EBITDA, excluding non-cash, stock-based compensation expense. We define EBITDA as net (loss) income, excluding depreciation and amortization, interest expense, net, other income, net, foreign exchange gain (loss) and provision for income taxes. The GAAP measure most comparable to Adjusted EBITDA is net (loss) income.

Non-GAAP operating (loss) income. We define non-GAAP operating (loss) income as GAAP operating (loss) income excluding non-cash, stock-based compensation expense and amortization of acquired intangible assets. The GAAP measure most comparable to non-GAAP operating (loss) income is operating (loss) income.

Non-GAAP net (loss) income. We define non-GAAP net (loss) income as GAAP net (loss) income excluding the after tax impact of non-cash, stock-based compensation expense and amortization of acquired intangible assets. The GAAP measure most comparable to non-GAAP net (loss) income is net (loss) income.

Non-GAAP net (loss) income per diluted share. We define non-GAAP net (loss) income per diluted share as GAAP net (loss) income per diluted share excluding the after tax impact of non-cash, stock-based compensation expense and amortization of acquired intangible assets. The GAAP measure most comparable to non-GAAP net (loss) income per diluted share is net (loss) income per diluted share.

Our management uses these non-GAAP financial measures to evaluate our operating performance and for internal planning and forecasting purposes. We believe that these measures help identify underlying trends in our business, are useful for comparing current results with prior period results, and are helpful to investors and financial analysts in assessing our operating performance. For example, our management considers Adjusted EBITDA to be an important indicator of our operational strength and the performance of our business and a good measure of our historical operating trends. However, each of these non-GAAP financial measures may have limitations as an analytical tool. In considering our Adjusted EBITDA, non-GAAP operating (loss) income, non-GAAP net (loss) income and non-GAAP net (loss) income per diluted share, investors should take into account the following reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures:

Adjusted EBITDA:

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)	2015			2014			2015			2014
Net (loss) income	$	(433	)	$	220		$	(3,516	)	$	(18,009	)
Add back:
Depreciation and amortization		959			763			2,487			2,157
Interest expense, net		57			85			171			256
Other income, net		(6	)		(4	)		(6	)		(7	)
Foreign exchange (gain) loss		(51	)		(194	)		172			(325	)
Provision for income taxes		344			214			472			15,870
EBITDA		870			1,084			(220	)		(58	)
Stock-based compensation expense		661			533			1,766			1,403
Adjusted EBITDA	$	1,531		$	1,617		$	1,546		$	1,345

24

Non-GAAP operating income (loss):

	Three Months Ended October 31,					Nine Months Ended October 31,
(in thousands)	2015			2014		2015			2014
Operating (loss) income	$	(89	)	$	321	$	(2,707	)	$	(2,215	)
Add back:
Stock-based compensation expense		661			533		1,766			1,403
Amortization of acquired intangible assets		88			88		263			263
Non-GAAP operating income (loss)	$	660		$	942	$	(678	)	$	(549	)

Non-GAAP net income (loss):

	Three Months Ended October 31,						Nine Months Ended October 31,
(in thousands)	2015			2014			2015			2014
Net (loss) income	$	(433	)	$	220		$	(3,516	)	$	(18,009	)
Add back:
Stock-based compensation expense		661			533			1,766			1,403
Amortization of acquired intangible assets		88			88			263			263
Income tax effect (1)		(265	)		(220	)		(710	)		(583	)
Non-GAAP net income (loss)	$	51		$	621		$	(2,197	)	$	(16,926	)

Non-GAAP net income (loss) per diluted share:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2015			2014			2015			2014
Net (loss) income per diluted share (2)	$	(0.03	)	$	0.02		$	(0.24	)	$	(1.31	)
Add back:
Stock-based compensation expense		0.05			0.04			0.12			0.10
Amortization of acquired intangible assets		0.01			0.01			0.02			0.02
Income tax effect (1)		(0.02	)		(0.02	)		(0.05	)		(0.04	)
Non-GAAP net income (loss) per diluted share (2)(3):	$	0.00		$	0.04		$	(0.15	)	$	(1.24	)

(1) The tax effect of non-cash stock-based compensation expense and non-cash amortization of acquired intangibles is estimated using a blended rate equivalent to our statutory United States federal tax rate and our estimated state tax rate. The tax effect is exclusive of any impact from valuation allowances established against our United States net deferred tax assets and other discrete items. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.

(2) Share amounts utilized on a fully diluted basis were approximately 14.6 million and 14.7 million for the three months ended October 31, 2015 and 2014, respectively, and 14.5 million and 13.7 million for the nine months ended October 31, 2015 and 2014, respectively.

(3) Due to rounding, totals may not equal the sum of line items in the table above.

25

Liquidity

Overview

Our primary sources of liquidity during the nine months ended October 31, 2015 were cash and cash equivalents on hand, cash flows provided by operating activities and cash proceeds from stock option and warrant exercises. Our primary uses of cash during the nine months ended October 31, 2015 were capital expenditures and payments of capital lease obligations. As of October 31, 2015, we had $23.2 million in cash and cash equivalents.

On December 10, 2013, we filed a shelf registration statement on Form S-3, which included a base prospectus relating to, among other things, the registration of $75 million of our common stock that may be offered and sold by us from time to time pursuant to Rule 415 promulgated under the Act, in amounts, at prices and on terms to be determined at the time of the offering.

Net Cash Flows from Operating Activities

Variations in the amount of our net cash provided or used by operating activities are primarily the result of changes in the amount of our working capital accounts, mainly accounts receivable and deferred revenue, the timing of cash payments from our customers and of our cash expenditures, principally employee salaries, accounts payable and payments of value added taxes and consumption taxes on the receivables of our foreign subsidiaries.

Cash payments from our customers fluctuate due to timing of new and renewal license sales, which typically coincide with our customers’ budget cycles. The fourth quarter of each fiscal year generally has the highest license sales, with payment of the license fee typically becoming due at the commencement of the license term. As a result, our cash flows from operations are typically highest in the first quarter of each fiscal year. Generally, customers are invoiced in advance for their annual subscription fee and the invoices are recorded in accounts receivable and deferred revenue, with deferred revenues being recognized ratably over the term of the subscription agreement.

Net cash provided by operating activities for the nine months ended October 31, 2015 was $3.9 million. Net cash used in operating activities for the nine months ended October 31, 2014 was $2.1 million. The increase during the current year period is primarily the result of fluctuations in accounts receivable and deferred revenue, which typically vary depending on the timing of our receipt and invoicing of customer orders and the timing of cash payments to us from customers.

Net Cash Flows from Investing Activities

Net cash used in investing activities for the nine months ended October 31, 2015 and 2014 was $1.4 million and $0.7 million, respectively. Capitalized renovations to our Burlington, Massachusetts headquarter office accounted for the majority of the increase in purchases of property and equipment during the current year period. In addition, restricted cash decreased by $0.2 million during the third quarter of fiscal 2016 as a result of the release of a portion of our required security deposit letter of credit in connection with the amendment of our corporate headquarters lease

Net Cash Flows from Financing Activities

Net cash used in financing activities for the nine months ended October 31, 2015 was $1.0 million, and consists of payments on our capital lease obligations of $2.1 million, partially offset by proceeds from stock option and warrant exercises of $1.2 million. Net cash used in financing activities for the nine months ended October 31, 2014 was $1.6 million, and consisted primarily of payments on our capital lease obligations of $2.3 million, partially offset by proceeds from stock option exercises of $0.7 million.

In September 2015, we financed $4.4 million of computer processor equipment, which we obtained under a capital lease arrangement as part of our investment to significantly expand the computing capacity at our high performance computing data center in New Jersey. The repayment of the associated capital lease obligation will occur over three years.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of either October 31, 2015 or January 31, 2015.

Contractual Commitments

Operating Leases

Effective July 1, 2015, we entered into an amendment to the lease for our corporate headquarters space in Burlington, Massachusetts. The amendment extends to the lease term, originally set to expire in March 2016, through March 2023 and reduces the leased space from 65,941 square feet to 44,241 square feet. The 21,700 square foot reduction primarily relates to first floor space that we had

26

previously subleased to a subtenant, and under the terms of the amendment, the landlord assumed the sublease effective July 1, 2015. The amendment also provides for a tenant improvement allowance of up to $1.7 million to cover renovations that will be made to the retained second floor space over the remainder of fiscal year 2016. We believe that the renovated space will be suitable and adequate to meet our planned growth needs at our headquarters over the next several years.

In conjunction with the relinquishment of the first floor space, the amendment reduces our required security deposit letter of credit from $0.5 million to $0.4 million. The reduction of the letter of credit is reflected as a change in restricted cash in the investing activity section of the accompanying consolidated statement of cash flows.

Effective August 1, 2015, we entered into an amendment to the lease for our office located in Japan. The amendment extends the lease term, originally set to expire in November 2015, through November 2017 and increases the leased space from approximately 4,047 square feet to 7,512 square feet.

In conjunction with the purchase of additional computer processor equipment for our high performance computing data center in New Jersey, effective as of September 1, 2015, our hosting and support arrangement for that facility was expanded to account for the new equipment.

As of October 31, 2015, after taking into consideration the above amendments, total future minimum lease payments under non-cancelable lease arrangements are as follows (in millions):

Fiscal year ended January 31,
2016 (remainder as of October 31, 2015)	$	1.2
2017		4.7
2018		4.7
2019		4.2
2020		3.0
2021		2.1
Thereafter		3.9
	$	23.8

Capital Resources

Our future capital requirements may vary materially from those now planned and will depend on many factors, including the costs to develop and implement new solutions and applications, the sales and marketing resources needed to further penetrate our market and gain acceptance of new solutions and applications we develop, the expansion of our operations in the United States and internationally and the response of competitors to our solutions and applications. Historically, we have experienced increases in our expenditures consistent with the growth in our operations and personnel, and we anticipate that our expenditures will continue to increase as we grow our business. Our practice has been to reinvest the undistributed earnings of our foreign subsidiaries in their local jurisdictions, and we currently do not intend to repatriate such earnings. As of October 31, 2015 and January 31, 2015, $6.8 million and $5.8 million, respectively, of our cash is held in bank accounts outside the United States and may not be available to fund our domestic operations and obligations without paying taxes upon repatriation.

We expect to be able to meet the funding needs of our United States operations and do not currently intend to repatriate undistributed earnings that have been indefinitely reinvested in our international subsidiaries.

We believe our cash on hand and cash flows from our operations will be sufficient to meet our working capital and capital expenditure requirements for the foreseeable future, including at least the next twelve months.

Seasonality

We have experienced and expect to continue to experience seasonal variations in the timing of customers’ purchases of our software products. Many customers make purchase decisions based on their budget cycles, which typically coincide with the calendar year, except in Japan, where our customer budget cycles typically begin on April 1. Because our software products are sold pursuant to annual subscription agreements and we recognize revenue from these subscriptions over the term of the agreement, downturns or upturns in invoices may not be immediately reflected in our operating results. However, these seasonal trends materially affect the timing of our cash flows, as we generally receive the annual license fee at the time the license term commences. As a result, our cash flows from operations are typically highest in the first quarter of each fiscal year.

27

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

As we conduct business in multiple international currencies throughout the world, our international operations generate and incur expenses that are denominated in foreign currencies. These amounts could be materially affected by currency fluctuations. Our principal exposures are to fluctuations in exchange rates for the United States dollar versus the British pound, Chinese yuan, Euro, Japanese yen, and Korean won. Changes in currency exchange rates could adversely affect our consolidated results of operations or financial position. Additionally, our international operations maintain cash balances denominated in foreign currencies. To reduce the risk associated with translation of foreign cash balances into our reporting currency, we typically avoid maintaining excess cash balances in foreign currencies. To date, we have not hedged our exposure to changes in foreign currency exchange rates and, as a result, we could incur unanticipated translation gains and losses.

The Euro was approximately 15.4% weaker against the United States dollar, on average, for the nine months ended October 31, 2015, when compared with the nine months ended October 31, 2014. The resulting net overall impact to revenue and operating expense was a decrease of approximately $3.2 million and $2.1 million, respectively, during the nine months ended October 31, 2015.

The exchange rate impact of other currencies for the nine months ended October 31, 2015, primarily driven by a weaker Japanese yen, was a decrease to revenue and operating expense of approximately $1.2 million and $0.6 million, respectively.

For the nine months ended October 31, 2015, a 10% change in the exchange rates for the United States dollar versus the British pound, Chinese yuan, Euro, Japanese yen, and Korean won would have resulted in a $2.4 million change in revenue.

Interest Rate Sensitivity

Our interest expense consists solely of fixed-rate interest under our outstanding capital lease obligations. As a result, we do not believe that we are exposed to material interest rate risk at this time. Interest income is sensitive to changes in the general level of United States and international interest rates. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Our cash and cash equivalents are relatively insensitive to interest rate changes. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives.

We do not believe that a 10% change in interest rates would have a material impact on our financial position or results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rule 13a-15(b) under the Exchange Act, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of October 31, 2015 was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of October 31, 2015.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended October 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

28

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any pending material legal proceedings. However, because of the nature of our business, we may be subject at any particular time to lawsuits or other claims arising in the ordinary course of our business, and we expect that this will continue to be the case in the future.

ITEM 1A. RISK FACTORS

You should carefully consider the risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015, filed with the SEC on March 24, 2015 and other documents we file with the SEC. The risks and uncertainties described are those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies, such as overall U.S. and non-U.S. economic and industry conditions including a global economic slowdown, geopolitical events, changes in laws or accounting rules, fluctuations in interest and exchange rates, terrorism, international conflicts, major health concerns, natural disasters or other disruptions of expected economic and business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business operations and liquidity.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(b) Use of Proceeds

On July 3, 2012, we completed the initial public offering of our common stock pursuant to our Registration Statement on Form S-1 (File No. 333-176019), which was declared effective by the Securities and Exchange Commission on June 27, 2012. The underwriters for the offering were Stifel Nicolaus & Company, Incorporated, Robert W. Baird & Co. Incorporated, Canaccord Genuity Inc. and Needham & Company, LLC. We did not use any of the net proceeds from this offering during the three months ended October 31, 2015.

29

ITEM 6. EXHIBITS

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, event date June 27, 2012, filed on July 3, 2012).
3.2	Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, event date June 27, 2012, filed on July 3, 2012).
3.3	Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2013).
31.1*	Rule 13a-14(a)/15d-14(a) Certification, executed by Stephen A. Remondi, President and Chief Executive Officer of Exa Corporation.
31.2*	Rule 13a-14(a)/15d-14(a) Certification, executed by Richard F. Gilbody, Chief Financial Officer of Exa Corporation.
32.1**	Section 1350 Certification, executed by Stephen A. Remondi, President and Chief Executive Officer of Exa Corporation.
32.2**	Section 1350 Certification, executed by Richard F. Gilbody, Chief Financial Officer of Exa Corporation.
101*	Interactive Data Files pursuant to Rule 405 of Regulation S-T (XBRL)

* Filed herewith.

** Furnished herewith.

30

EXA CORPORATION

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EXA CORPORATION (Registrant)
By:	/s/ Richard F. Gilbody
	Richard F. Gilbody
	Chief Financial Officer
	Date: December 3, 2015

31

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Stephen A. Remondi, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Exa Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter is the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Stephen A. Remondi
	Stephen A. Remondi
	President and Chief Executive Officer (Principal Executive Officer)
Date:	December 3, 2015

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard F. Gilbody, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Exa Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter is the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Richard F. Gilbody
	Richard F. Gilbody
	Chief Financial Officer (Principal Financial Officer)
Date:	December 3, 2015

EX-32.1

Exhibit 32.1

STATEMENT REQUIRED BY 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code and shall not be relied on by any person for any other purpose.

In connection with the Quarterly Report on Form 10-Q of Exa Corporation (the “Company”) for the period ended October 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Stephen A. Remondi, President, Chief Executive Officer and Director of the Company, certifies that:

• the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 3, 2015

/s/ Stephen A. Remondi

Stephen A. Remondi

President and Chief Executive Officer

(Principal Executive Officer)

The foregoing certification is being furnished with the Company’s Quarterly Report on Form 10-Q for the period ended October 31, 2015, pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general information language in such filing.

EX-32.2

Exhibit 32.2

STATEMENT REQUIRED BY 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code and shall not be relied on by any person for any other purpose.

In connection with the Quarterly Report on Form 10-Q of Exa Corporation (the “Company”) for the period ended October 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Richard F. Gilbody, Chief Financial Officer of the Company, certifies that:

• the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 3, 2015

/s/ Richard F. Gilbody

Richard F. Gilbody

Chief Financial Officer

(Principal Financial Officer)

The foregoing certification is being furnished with the Company’s Quarterly Report on Form 10-Q for the period ended October 31, 2015, pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general information language in such filing.

XML

Commitments and Contingencies - Future Minimum Lease Payments Under Non-Cancelable Lease Arrangements (Detail) $ in Thousands	Oct. 31, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2016 (remainder as of October 31, 2015)	$ 1,211
2017	4,711
2018	4,688
2019	4,209
2020	2,980
2021	2,086
Thereafter	3,942
Total	$ 23,827

XML

Deferred Rent - Deferred Rent (Detail) - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015
Deferred Revenue Disclosure [Abstract]
Leasehold improvement incentive	$ 1,234	$ 308
Cumulative non-cash rent expense	853	761
Total deferred rent	2,087	1,069
Less: current portion included in accrued expenses	(38)	(597)
Deferred rent, net of current portion	2,049	472
Total deferred rent	$ 2,087	$ 1,069

XML

Commitments and Contingencies (Tables)

9 Months Ended

Oct. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Lease Payments Under Non-Cancelable Lease Arrangements

As of October 31, 2015, after taking into consideration the above amendments, total future minimum lease payments under non-cancelable lease arrangements are as follows:

Fiscal year ended January 31,
2016 (remainder as of October 31, 2015)	$	1,211
2017		4,711
2018		4,688
2019		4,209
2020		2,980
2021		2,086
Thereafter		3,942
	$	23,827

XML

Stockholders' Equity and Stock-Based Compensation - Stock-Based Compensation Expense Related to Stock Options Issued and Restricted Stock Units by the Company (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Stock Based Compensation [Line Items]
Stock-based compensation expense	$ 661	$ 533	$ 1,766	$ 1,403
Cost of Revenues [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	64	52	186	134
Sales and Marketing [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	117	88	317	249
Research and Development [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	265	200	691	547
General and Administrative [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	$ 215	$ 193	$ 572	$ 473

XML

Acquired Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible assets amortization expense	$ 88	$ 88	$ 263	$ 263

XML

Property and Equipment, net

9 Months Ended

Oct. 31, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment, net

4. Property and Equipment, net

Property and equipment, net consists of the following:

	October 31, 2015			January 31, 2015
Computer software and equipment	$	25,668		$	20,637
Office equipment and furniture		463			422
Leasehold improvements		2,652			2,593
Construction-in-process		1,009			—
Total property and equipment		29,792			23,652
Less: accumulated depreciation		(18,598	)		(16,691	)
Property and equipment, net	$	11,194		$	6,961

For the three and nine months ended October 31, 2015, depreciation expense was $871 and $2,224, respectively. For the three and nine months ended October 31, 2014, depreciation expense was $675 and $1,894, respectively. Included in computer software and equipment and office equipment and furniture is equipment held pursuant to capital leases with costs of $22,708 and $18,303 and accumulated depreciation of $14,023 and $12,736 as of October 31, 2015 and January 31, 2015, respectively.

In September 2015, the Company capitalized $4,656 of computer processor equipment for its high performance computing data center in New Jersey. The equipment is included in computer software and equipment and the purchase price (exclusive of sales tax of $305 that was paid in cash), is being financed over three years under an arrangement that qualifies for capital lease accounting treatment.

The construction-in-process balance as of October 31, 2015 primarily relates to furniture and equipment purchases and leasehold improvement construction for the Company’s corporate headquarter renovation in Burlington, Massachusetts. The renovation project is expected to be substantially complete by January 2016. See Notes 6 and 9.

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Income Tax Disclosure [Line Items]
Provision for income taxes	$ 344	$ 214	$ 472	$ 15,870
Income tax examination, description			With limited exceptions, the Company is no longer subject to federal, state, local or foreign examinations for years ending prior to January 31, 2011. However, carryforward attributes that were generated in tax years ending prior to January 31, 2012 may still be adjusted upon examination by state or local tax authorities if they either have been or will be used in a future period.
Threshold percentage for change in ownership			50.00%
Period of change in ownership			3 years
Domestic Tax Authority [Member]
Income Tax Disclosure [Line Items]
Valuation allowance		$ 14,506		14,506
State [Member]
Income Tax Disclosure [Line Items]
Deferred tax assets written off				$ 700

XML

Computation of Net (Loss) Per Share - Outstanding Options, Restricted Stock Unit Awards and Warrants Excluded from Computation of Diluted Net (Loss) Income Per Share (Detail) - shares	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Earnings Per Share [Abstract]
Options, restricted stock unit awards and warrants to purchase common stock	2,514,955	1,633,635	2,514,955	2,785,477

XML

Computation of Net (Loss) Income Per Share - Calculation of Basic and Diluted Net (Loss) Income Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Numerator:
Net (loss) income	$ (433)	$ 220	$ (3,516)	$ (18,009)
Denominator:
Weighted average common shares, basic	14,610,479	13,822,400	14,484,563	13,701,380
Dilutive effect of:
Options to purchase common and preferred stock		898,619
Warrants to purchase common stock		9,285
Restricted stock units		19,521
Weighted average common shares, diluted	14,610,479	14,749,825	14,484,563	13,701,380
Basic net (loss) income per share	$ (0.03)	$ 0.02	$ (0.24)	$ (1.31)
Diluted net (loss) income per share	$ (0.03)	$ 0.02	$ (0.24)	$ (1.31)

XML

Geographic Information - Revenues by Geographic Area (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 16,964	$ 15,958	$ 47,187	$ 44,571
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	5,320	4,332	13,462	10,616
Japan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	2,917	2,339	7,396	6,857
Germany [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	2,431	3,026	7,081	8,555
United Kingdom [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,700	1,220	5,403	3,609
France [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,768	2,361	5,387	6,597
Korea [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,464	1,319	4,170	3,974
Sweden [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	420	501	1,377	1,846
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 944	$ 860	$ 2,911	$ 2,517

XML

Property and Equipment, Net - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 29,792	$ 23,652
Less accumulated depreciation	(18,598)	(16,691)
Property and equipment, net	11,194	6,961
Computer Software and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	25,668	20,637
Office Equipment and Furniture [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	463	422
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	2,652	$ 2,593
Construction in Process [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 1,009

XML

Property and Equipment, Net - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014	Jan. 31, 2015
Property, Plant and Equipment [Line Items]
Depreciation expense		$ 871	$ 675	$ 2,224	$ 1,894
Cost of equipment held pursuant to capital leases		22,708		22,708		$ 18,303
Accumulated depreciation		18,598		18,598		16,691
Assets Held under Capital Leases [Member]
Property, Plant and Equipment [Line Items]
Accumulated depreciation		$ 14,023		$ 14,023		$ 12,736
Computer Processor Equipment [Member]
Property, Plant and Equipment [Line Items]
Capitalized computer processor equipment	$ 4,656
Sales tax paid in cash	$ 305
Capital lease agreement period	3 years

XML

Computation of Net (Loss) Income Per Share

9 Months Ended

Oct. 31, 2015

Earnings Per Share [Abstract]

Computation of Net (Loss) Income Per Share

3. Computation of Net (Loss) Income Per Share

Net (loss) income per share has been computed using the weighted average number of shares of common stock outstanding during each period. Diluted amounts per share include the impact of the Company’s outstanding potential common shares, such as shares issuable upon exercise of in-the-money stock options or warrants, when dilutive. Potential common shares that are anti-dilutive are excluded from the calculation of diluted net (loss) income per common share.

The following summarizes the calculation of basic and diluted net (loss) income per share:

	Three Months Ended October 31,					Nine Months Ended October 31,
	2015			2014		2015			2014
Numerator:
Net (loss) income	$	(433	)	$	220	$	(3,516	)	$	(18,009	)
Denominator:
Weighted average common shares, basic		14,610,479			13,822,400		14,484,563			13,701,380
Dilutive effect of:
Options to purchase common and preferred stock		—			898,619		—			—
Warrants to purchase common stock		—			9,285		—			—
Restricted stock units		—			19,521		—			—
Weighted average common shares, diluted		14,610,479			14,749,825		14,484,563			13,701,380
Basic net (loss) income per share	$	(0.03	)	$	0.02	$	(0.24	)	$	(1.31	)
Diluted net (loss) income per share	$	(0.03	)	$	0.02	$	(0.24	)	$	(1.31	)

The table below represents outstanding options, restricted stock unit awards and warrants that were excluded from the computation of diluted net (loss) income per share for the periods indicated because including them would have had an anti-dilutive effect. All of the Company’s outstanding stock options, unvested restricted stock units and warrants were anti-dilutive for the three months ended October 31, 2015 and for the nine months ended October 31, 2015 and 2014 due to the net loss incurred by the Company.

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
Options, restricted stock unit awards and warrants to purchase common stock		2,514,955		1,633,635		2,514,955		2,785,477

XML

Accrued Expenses - Accrued Expenses (Detail) - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015
Payables and Accruals [Abstract]
Accrued payroll	$ 1,729	$ 1,695
Accrued commissions and bonuses	2,152	3,150
Sales and withholding taxes	793	2,427
Accrued income taxes payable	598	597
Legal and professional	657	275
Deferred rent, current portion	38	597
Other accrued expenses	1,100	1,844
Total accrued expenses	$ 7,067	$ 10,585

XML

Stockholders' Equity and Stock-Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 31, 2015	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Remaining shares of outstanding warrants		0		0
Warrants exercised to purchase common stock	21,538
Exercise price of common stock	$ 6.11
Weighted average grant date per share for stock options		$ 4.14	$ 5.04	$ 4.21	$ 5.48
Total unrecognized compensation cost		$ 4,224		$ 4,224
Weighted-average period				2 years 5 months 12 days
Performance Based Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense				$ 228

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015
Current assets:
Cash and cash equivalents	$ 23,186	$ 21,785
Accounts receivable	11,602	27,462
Prepaid expenses and other current assets	2,867	3,098
Total current assets	37,655	52,345
Property and equipment, net	11,194	6,961
Intangible assets, net	2,132	2,395
Deferred tax assets	261	260
Restricted cash	352	525
Other assets	729	567
Total assets	52,323	63,053
Current liabilities:
Accounts payable	2,310	1,620
Accrued expenses	7,067	10,585
Current portion of deferred revenue	15,710	26,863
Current portion of capital lease obligations	2,987	2,390
Total current liabilities	28,074	41,458
Deferred revenue	122	38
Capital lease obligations	3,220	1,602
Deferred rent	2,049	472
Other long-term liabilities	523	592
Total liabilities	$ 33,988	$ 44,162
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
Common stock, $0.001 par value; 30,000,000 shares authorized; 14,653,862 and 13,874,744 shares issued, respectively; 14,621,360 and 13,842,242 shares outstanding, respectively	$ 15	$ 14
Additional paid-in capital	91,106	88,181
Accumulated deficit	(72,394)	(68,878)
Treasury stock (32,502 common shares, at cost)	0	0
Accumulated other comprehensive loss	(392)	(426)
Total stockholders' equity	18,335	18,891
Total liabilities and stockholders' equity	$ 52,323	$ 63,053

XML

Geographic Information - Net Long-Lived Assets by Principal Geographic Areas (Detail) - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	$ 11,194	$ 6,961
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	10,449	6,080
France [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	421	590
Germany [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	122	132
Japan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	139	91
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	$ 63	$ 68

XML

Description of Business

9 Months Ended

Oct. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

1. Description of Business

Exa Corporation (the “Company” or “Exa”), a Delaware corporation, develops, sells and supports simulation software and services used primarily by vehicle manufacturers to enhance the performance of their products, reduce product development costs and improve the efficiency of their design and engineering processes. The Company’s solutions enable engineers and designers to augment or replace conventional methods of evaluating designs that rely on expensive and inefficient physical prototypes and test facilities with accurate digital simulations that are more useful, cost effective and timely. The Company’s simulation solutions enable customers to gain crucial insights about design performance early in the design cycle, reducing the likelihood of expensive redesigns and late-stage engineering changes, which result in cost savings and fundamental improvements in the development process. The Company is primarily focused on the ground transportation market, but is also exploring the application of its capabilities in the aerospace, oil and gas production, chemical processing, architecture, engineering and construction, power generation, biomedical and electronics industries.

Exa has offices and sells directly in the United States and through subsidiaries in France, Germany, Italy, Japan, Korea, China, and the United Kingdom. The Company also conducts business in Sweden, India, Brazil, Russia, Canada, Finland, Spain and Australia.

XML

Fair Value Measurements - Fair Value Hierarchy for Financial Assets and Liabilities Measured at Fair Value (Detail) - Money Market Funds [Member] - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015
Assets:
Money market funds	$ 12,517	$ 12,514
Level 1 [Member]
Assets:
Money market funds	$ 12,517	$ 12,514

XML

Deferred Rent (Tables)

9 Months Ended

Oct. 31, 2015

Text Block [Abstract]

Deferred Rent

Deferred rent consists of the following:

	October 31, 2015			January 31, 2015
Leasehold improvement incentive	$	1,234		$	308
Cumulative non-cash rent expense		853			761
Total deferred rent		2,087			1,069
Less: current portion included in accrued expenses		(38	)		(597	)
Deferred rent, net of current portion	$	2,049		$	472

XML

Acquired Intangible Assets - Carrying Value of Intangible Assets (Detail) - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Cost	$ 3,543	$ 3,543
Accumulated Amortization	(1,411)	(1,148)
Net Book Value	2,132	2,395
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	3,505	3,505
Accumulated Amortization	(1,373)	(1,110)
Net Book Value	2,132	2,395
Access to Facilities Contract [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	38	38
Accumulated Amortization	$ (38)	$ (38)

XML

Acquired Intangible Assets (Tables)

9 Months Ended

Oct. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Carrying Value of Intangible Assets

The following table reflects the carrying value of intangible assets as of October 31, 2015:

	October 31, 2015
	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,373	)	$	2,132
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,411	)	$	2,132

The following table reflects the carrying value of intangible assets as of January 31, 2015:

	January 31, 2015
	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,110	)	$	2,395
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,148	)	$	2,395

XML

Summary of Significant Accounting Policies

9 Months Ended

Oct. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Applicable Accounting Guidance

Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative United States generally accepted accounting principles (“GAAP”) as found in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Basis of Presentation

The interim financial data as of October 31, 2015 and for the three and nine months ended October 31, 2015 and 2014 are unaudited; however, in the opinion of the Company’s management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated balance sheet presented as of January 31, 2015 has been derived from the audited consolidated financial statements as of that date. The unaudited condensed consolidated financial statements presented herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Exa annual report on Form 10-K for the year ended January 31, 2015 filed with the Securities and Exchange Commission on March 24, 2015.

Reclassification

Certain prior year amounts have been reclassified to be consistent with current year classifications.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make significant estimates 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 the reported amounts of revenues and expenses during the reporting periods. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from management’s estimates if future events differ substantially from past experience, or other assumptions, which reasonable when made, do not turn out to be substantially accurate.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle, as a result of which more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein. However, in July 2015, the FASB approved a one-year deferral that does not require adoption until calendar year 2018 (fiscal 2019 for the Company). The two permitted transition methods under the new standard are: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard when it becomes effective.

In June 2014, the FASB issued ASU 2014-12, Stock Compensation, which is a standards update on accounting for share-based payments when the terms of the award provide that a performance target could be achieved after a requisite service period. The standard is effective for annual periods beginning after December 31, 2015, and interim periods therein, with early adoption permitted. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under the new guidance, management will be required to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for interim periods therein. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

In April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The guidance clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. The standard will be effective for annual reporting periods beginning after December 15, 2016, and for interim periods therein. Early adoption is permitted. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 31, 2015	Jan. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	14,653,862	13,874,744
Common stock, shares outstanding	14,621,360	13,842,242
Treasury stock, shares	32,502	32,502

XML

Geographic Information

9 Months Ended

Oct. 31, 2015

Segment Reporting [Abstract]

Geographic Information

12. Geographic Information

Revenue by geographic area, attributed to individual countries based upon location of the external customer, is as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
United States	$	5,320	$	4,332	$	13,462	$	10,616
Japan		2,917		2,339		7,396		6,857
Germany		2,431		3,026		7,081		8,555
United Kingdom		1,700		1,220		5,403		3,609
France		1,768		2,361		5,387		6,597
Korea		1,464		1,319		4,170		3,974
Sweden		420		501		1,377		1,846
Other		944		860		2,911		2,517
Total	$	16,964	$	15,958	$	47,187	$	44,571

Net long-lived assets, consisting of net property and equipment, are subject to geographic risks because they are generally difficult to move and to effectively utilize in another geographic area in a reasonable time period and because they are relatively illiquid. Net long-lived assets by principal geographic areas were as follows:

	October 31, 2015		January 31, 2015
United States	$	10,449	$	6,080
France		421		590
Germany		122		132
Japan		139		91
Other		63		68
Total property and equipment, net	$	11,194	$	6,961

XML

Document and Entity Information - shares	9 Months Ended
	Oct. 31, 2015	Nov. 30, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Trading Symbol	EXA
Entity Registrant Name	EXA CORP
Entity Central Index Key	0000890264
Current Fiscal Year End Date	--01-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		14,625,975

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Oct. 31, 2015

Accounting Policies [Abstract]

Applicable Accounting Guidance

Applicable Accounting Guidance

Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative United States generally accepted accounting principles (“GAAP”) as found in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Basis of Presentation

Basis of Presentation

The interim financial data as of October 31, 2015 and for the three and nine months ended October 31, 2015 and 2014 are unaudited; however, in the opinion of the Company’s management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated balance sheet presented as of January 31, 2015 has been derived from the audited consolidated financial statements as of that date. The unaudited condensed consolidated financial statements presented herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Exa annual report on Form 10-K for the year ended January 31, 2015 filed with the Securities and Exchange Commission on March 24, 2015.

Reclassification

Reclassification

Certain prior year amounts have been reclassified to be consistent with current year classifications.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make significant estimates 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 the reported amounts of revenues and expenses during the reporting periods. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from management’s estimates if future events differ substantially from past experience, or other assumptions, which reasonable when made, do not turn out to be substantially accurate.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle, as a result of which more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein. However, in July 2015, the FASB approved a one-year deferral that does not require adoption until calendar year 2018 (fiscal 2019 for the Company). The two permitted transition methods under the new standard are: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard when it becomes effective.

In June 2014, the FASB issued ASU 2014-12, Stock Compensation, which is a standards update on accounting for share-based payments when the terms of the award provide that a performance target could be achieved after a requisite service period. The standard is effective for annual periods beginning after December 31, 2015, and interim periods therein, with early adoption permitted. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under the new guidance, management will be required to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for interim periods therein. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

In April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The guidance clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. The standard will be effective for annual reporting periods beginning after December 15, 2016, and for interim periods therein. Early adoption is permitted. This ASU is not expected to have an impact on the Company’s financial statements or disclosures.

XML

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014	Oct. 31, 2015	Oct. 31, 2014
Revenue:
License revenue	$ 13,966	$ 12,866	$ 39,185	$ 36,842
Project revenue	2,998	3,092	8,002	7,729
Total revenues	16,964	15,958	47,187	44,571
Operating expenses:
Cost of revenues	5,118	4,562	14,516	13,790
Sales and marketing	2,336	2,442	7,264	7,518
Research and development	6,143	5,462	18,265	15,968
General and administrative	3,456	3,171	9,849	9,510
Total operating expenses	17,053	15,637	49,894	46,786
(Loss) income from operations	(89)	321	(2,707)	(2,215)
Other income (expense), net:
Foreign exchange gain (loss)	51	194	(172)	325
Interest expense	(60)	(88)	(179)	(265)
Interest income	3	3	8	9
Other income, net	6	4	6	7
Total other income (expense), net	0	113	(337)	76
(Loss) income before income taxes	(89)	434	(3,044)	(2,139)
Provision for income taxes	(344)	(214)	(472)	(15,870)
Net (loss) income	$ (433)	$ 220	$ (3,516)	$ (18,009)
Net (loss) income per share:
Basic	$ (0.03)	$ 0.02	$ (0.24)	$ (1.31)
Diluted	$ (0.03)	$ 0.02	$ (0.24)	$ (1.31)
Weighted average shares outstanding used in computing net (loss) income per share:
Basic	14,610,479	13,822,400	14,484,563	13,701,380
Diluted	14,610,479	14,749,825	14,484,563	13,701,380
Comprehensive (loss) income:
Net (loss) income	$ (433)	$ 220	$ (3,516)	$ (18,009)
Foreign currency translation adjustments	6	(126)	34	(160)
Comprehensive (loss) income	$ (427)	$ 94	$ (3,482)	$ (18,169)

XML

Fair Value Measurements

9 Months Ended

Oct. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

7. Fair Value Measurements

Financial instruments consist primarily of cash and cash equivalents, accounts receivable and capital lease obligations. As of October 31, 2015 and January 31, 2015, the carrying amounts of these instruments approximate their fair values. The estimated fair values have been determined from information obtained from market sources and management estimates.

In determining the fair value of its financial assets and liabilities, the Company uses various valuation approaches. ASC 820, Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement and that are based on management’s best estimate of inputs market participants would use for pricing the asset or liability at the measurement date, including assumptions about risk.

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of October 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	12,517	$	12,517	$	—	$	—

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of January 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	12,514	$	12,514	$	—	$	—

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

XML

Deferred Rent

9 Months Ended

Oct. 31, 2015

Text Block [Abstract]

Deferred Rent

6. Deferred Rent

Payment escalations, rent holidays and lease incentives specified in the Company’s non-cancelable operating lease and hosting agreements are recognized on a straight-line basis over the terms of the agreements. The differences arising from straight-line expense recognition and cash payments are recorded as deferred rent in the accompanying consolidated balance sheets. Tenant leasehold improvement allowances received from landlords are recorded as deferred rent and are amortized as operating expense over the applicable lease terms.

Deferred rent consists of the following:

	October 31, 2015			January 31, 2015
Leasehold improvement incentive	$	1,234		$	308
Cumulative non-cash rent expense		853			761
Total deferred rent		2,087			1,069
Less: current portion included in accrued expenses		(38	)		(597	)
Deferred rent, net of current portion	$	2,049		$	472

As discussed in Note 9, the Company entered into an amendment to its corporate headquarter lease in Burlington, Massachusetts effective July 1, 2015. The amendment provided for a tenant improvement allowance of up to $1,681 to cover renovations being made to the Company’s leased space over the remainder of fiscal year 2016. As of October 31, 2015, the Company recorded $1,047 of the tenant improvement allowance as an increase to deferred rent for renovation costs incurred to date. Of these costs, the Company paid for approximately $493, and accordingly, recorded a receivable from the landlord for this amount which is included in other current assets in the accompanying consolidated balance sheet. The $554 balance of these costs was funded by the landlord and is recorded as construction-in-process within property and equipment, net in the accompanying consolidated balance sheet.

XML

Fair Value Measurements (Tables)

9 Months Ended

Oct. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Hierarchy for Financial Assets and Liabilities Measured at Fair Value

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of October 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	12,517	$	12,517	$	—	$	—

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of January 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	12,514	$	12,514	$	—	$	—

XML

Computation of Net (Loss) Income Per Share (Tables)

9 Months Ended

Oct. 31, 2015

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Net (Loss) Income Per Share

The following summarizes the calculation of basic and diluted net (loss) income per share:

	Three Months Ended October 31,					Nine Months Ended October 31,
	2015			2014		2015			2014
Numerator:
Net (loss) income	$	(433	)	$	220	$	(3,516	)	$	(18,009	)
Denominator:
Weighted average common shares, basic		14,610,479			13,822,400		14,484,563			13,701,380
Dilutive effect of:
Options to purchase common and preferred stock		—			898,619		—			—
Warrants to purchase common stock		—			9,285		—			—
Restricted stock units		—			19,521		—			—
Weighted average common shares, diluted		14,610,479			14,749,825		14,484,563			13,701,380
Basic net (loss) income per share	$	(0.03	)	$	0.02	$	(0.24	)	$	(1.31	)
Diluted net (loss) income per share	$	(0.03	)	$	0.02	$	(0.24	)	$	(1.31	)

Outstanding Options, Restricted Stock Unit Awards and Warrants Excluded from Computation of Diluted Net (Loss) Income Per Share

The table below represents outstanding options, restricted stock unit awards and warrants that were excluded from the computation of diluted net (loss) income per share for the periods indicated because including them would have had an anti-dilutive effect. All of the Company’s outstanding stock options, unvested restricted stock units and warrants were anti-dilutive for the three months ended October 31, 2015 and for the nine months ended October 31, 2015 and 2014 due to the net loss incurred by the Company.

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
Options, restricted stock unit awards and warrants to purchase common stock		2,514,955		1,633,635		2,514,955		2,785,477

XML

Stockholders' Equity and Stock-Based Compensation

9 Months Ended

Oct. 31, 2015

Equity [Abstract]

Stockholders' Equity and Stock-Based Compensation

10. Stockholders’ Equity and Stock-Based Compensation

Warrants Exercised

In July 2015, Massachusetts Capital Resource Company exercised warrants to purchase 21,538 shares of common stock at a cash exercise price of $6.11 per share. The Company has no remaining outstanding warrants as of October 31, 2015.

Stock-Based Compensation Expense

The fair value of common stock service-based options for employees and directors is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used:

	Nine Months Ended October 31,
	2015			2014
Estimated dividend yield		0	%		0	%
Expected stock price volatility		36.8	%		47.4	%
Weighted-average risk-free interest rate		2.0	%		2.2	%
Expected life of options (in years)		6.23			6.25

The weighted-average grant date fair value per share for service-based stock options granted in the three and nine months ended October 31, 2015 was $4.14 and $4.21, respectively. The weighted average grant date fair value per share for service-based stock options granted in the three and nine months ended October 31, 2014 was $5.04 and $5.48, respectively.

For standard service-based stock options, the Company records stock-based compensation expense over the estimated service/vesting period. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.

Performance-based stock options are recognized as expense over the requisite service period when it becomes probable that performance measures triggering vesting will be met. Certain grants vested during the first quarter of fiscal year 2016 based on achieved performance metrics for fiscal year 2015. As of October 31, 2015, the Company concluded that it was probable that required metrics for certain performance-based grants would be achieved for fiscal year 2016. As a result, the Company recognized $228 in share-based compensation expense associated with these options.

Total stock-based compensation expense related to stock options and restricted stock units issued by the Company is as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
Cost of revenues	$	64	$	52	$	186	$	134
Sales and marketing		117		88		317		249
Research and development		265		200		691		547
General and administrative		215		193		572		473
Total	$	661	$	533	$	1,766	$	1,403

The total unrecognized compensation cost related to outstanding stock options is $4,224 at October 31, 2015. This amount is expected to be recognized over a weighted-average period of 2.45 years.

XML

Acquired Intangible Assets

9 Months Ended

Oct. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Acquired Intangible Assets

8. Acquired Intangible Assets

Intangible assets acquired in a business combination are recorded under the purchase method of accounting at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives.

The following table reflects the carrying value of intangible assets as of October 31, 2015:

	October 31, 2015
	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,373	)	$	2,132
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,411	)	$	2,132

The following table reflects the carrying value of intangible assets as of January 31, 2015:

	January 31, 2015
	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,110	)	$	2,395
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,148	)	$	2,395

Amortization expense of intangible assets was $88 for each of the three months ended October 31, 2015 and 2014 and $263 for each of the nine months ended October 31, 2015 and 2014.

XML

Commitments and Contingencies

9 Months Ended

Oct. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

Legal Contingencies

From time to time the Company is involved in legal proceedings arising in the ordinary course of business. There is no litigation pending that could, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Guarantees and Indemnification Obligations

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any United States patent, or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification provisions is generally perpetual after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these agreements is unlimited.

Based on historical experience and information known as of October 31, 2015 and January 31, 2015, the Company has not recorded any liabilities for these guarantees and indemnities.

Operating Leases

Effective July 1, 2015, the Company entered into an amendment to the lease for its corporate headquarters space in Burlington, Massachusetts. The amendment extends the lease term, originally set to expire in March 2016, through March 2023 and reduces the leased space from 65,941 square feet to 44,241 square feet. The 21,700 square foot reduction primarily relates to first floor space that had been subleased by the Company to a subtenant, and under the terms of the amendment, the landlord assumed the sublease effective July 1, 2015. The amendment also provides for a tenant improvement allowance of up to $1,681 to cover renovations that are being made to the retained second floor space over the remainder of fiscal year 2016. Management believes that the renovated space will be suitable and adequate to meet the Company’s planned growth needs at its headquarters over the next several years.

In conjunction with the relinquishment of the first floor space, the amendment reduced the Company’s required security deposit letter of credit from $525 to $352. The reduction of the letter of credit is reflected as a change in restricted cash in the investing activity section of the accompanying consolidated statement of cash flows.

Effective August 1, 2015, the Company entered into an amendment to the lease for its office space located in Japan. The amendment extends the lease term, originally set to expire in November 2015, through November 2017 and increases the leased space from approximately 4,047 square feet to 7,512 square feet.

In conjunction with the purchase of additional computer processor equipment for its high performance computing data center in New Jersey described in Note 4, effective as of September 1, 2015, the Company’s hosting and support arrangement for that facility was expanded to account for the new equipment.

As of October 31, 2015, after taking into consideration the above amendments, total future minimum lease payments under non-cancelable lease arrangements are as follows:

Fiscal year ended January 31,
2016 (remainder as of October 31, 2015)	$	1,211
2017		4,711
2018		4,688
2019		4,209
2020		2,980
2021		2,086
Thereafter		3,942
	$	23,827

XML

Income Taxes

9 Months Ended

Oct. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

For the three and nine months ended October 31, 2015, the Company’s income tax provision was $344 and $472, respectively. The provision for both periods primarily consists of the tax effects of foreign operating results and foreign withholding taxes. For the three and nine months ended October 31, 2014, the income tax provision was $214 and $15,870, respectively. The provision for the nine months ended October 31, 2014 includes a $14,506 non-cash charge to record a valuation allowance against the Company’s United States net deferred tax assets and a $700 non-cash write-off of state deferred tax assets.

In determining the realizability of the net United States federal and state deferred tax assets, the Company considers numerous factors including historical profitability, estimated future taxable income, prudent and feasible tax planning strategies and the industry in which it operates. Management reassesses the realization of the deferred tax assets each reporting period, which resulted in a valuation allowance against the full amount of the Company’s United States deferred tax assets in the first quarter of fiscal year 2015. To the extent that the financial results of the United States operations improve in the future and the deferred tax assets become realizable, the Company will reduce the valuation allowance through earnings.

The Company does not expect that its unrecognized tax benefit will change significantly within the next twelve months. The Company and one or more of its subsidiaries file United States federal income tax returns and tax returns in various state and foreign jurisdictions. With limited exceptions, the Company is no longer subject to federal, state, local or foreign examinations for years ending prior to January 31, 2011. However, carryforward attributes that were generated in tax years ending prior to January 31, 2012 may still be adjusted upon examination by state or local tax authorities if they either have been or will be used in a future period.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in the Company’s ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset its taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. During the first quarter of fiscal year 2015, management determined that the Company had experienced an ownership change for purposes of Section 382. This ownership change resulted in annual limitations to the amount of net operating loss carryforwards that can be utilized to offset future taxable income, if any, at the federal level. The Company’s management has determined that, as of October 31, 2015, it had not experienced another ownership change for purposes of Section 382. However, future transactions in the Company’s common stock could trigger an ownership change for purposes of Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset the Company’s taxable income, if any. Any such limitation, whether as the result of sales of common stock by the Company’s existing stockholders or sales of common stock by the Company, could have a material adverse effect on the Company’s results of operations in future years.

XML

Deferred Rent - Additional Information (Detail) - USD ($) $ in Thousands	9 Months Ended
	Oct. 31, 2015	Jul. 01, 2015	Jan. 31, 2015
Deferred Rent [Line Items]
Property and equipment, net	$ 11,194		$ 6,961
Corporate Headquarters [Member]
Deferred Rent [Line Items]
Tenant improvement allowance, remainder of fiscal year 2016	1,681	$ 1,681
Tenant improvement allowance	1,047
Landlord [Member]
Deferred Rent [Line Items]
Receivable	493
Landlord [Member] | Construction in Process [Member]
Deferred Rent [Line Items]
Property and equipment, net	$ 554

XML

Accrued Expenses (Tables)

9 Months Ended

Oct. 31, 2015

Payables and Accruals [Abstract]

Accrued Expenses

Accrued expenses consist of the following:

	October 31, 2015		January 31, 2015
Accrued payroll	$	1,729	$	1,695
Accrued commissions and bonuses		2,152		3,150
Sales and withholding taxes		793		2,427
Accrued income taxes payable		598		597
Legal and professional		657		275
Deferred rent, current portion		38		597
Other accrued expenses		1,100		1,844
Total accrued expenses	$	7,067	$	10,585

XML

Stockholders' Equity and Stock-Based Compensation (Tables)

9 Months Ended

Oct. 31, 2015

Equity [Abstract]

Assumptions Used to Calculate Fair Value of Common Stock Service-based Options for Employees and Directors

The fair value of common stock service-based options for employees and directors is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used:

	Nine Months Ended October 31,
	2015			2014
Estimated dividend yield		0	%		0	%
Expected stock price volatility		36.8	%		47.4	%
Weighted-average risk-free interest rate		2.0	%		2.2	%
Expected life of options (in years)		6.23			6.25

Stock-Based Compensation Expense Related to Stock Options Issued and Restricted Stock Units by the Company

Total stock-based compensation expense related to stock options and restricted stock units issued by the Company is as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
Cost of revenues	$	64	$	52	$	186	$	134
Sales and marketing		117		88		317		249
Research and development		265		200		691		547
General and administrative		215		193		572		473
Total	$	661	$	533	$	1,766	$	1,403

XML

Stockholders' Equity and Stock-Based Compensation - Assumptions Used to Calculate Fair Value of Common Stock Service-based Options for Employees and Directors (Detail)	9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Estimated dividend yield	0.00%	0.00%
Expected stock price volatility	36.80%	47.40%
Weighted-average risk-free interest rate	2.00%	2.20%
Expected life of options (in years)	6 years 2 months 23 days	6 years 3 months

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Oct. 31, 2015	Oct. 31, 2014
Cash flows provided by operating activities:
Net loss	$ (3,516)	$ (18,009)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	2,487	2,157
Stock-based compensation expense	1,766	1,403
Deferred rent expense	472	(267)
Deferred income taxes	4	15,209
Net change in operating assets and liabilities:
Accounts receivable	15,948	20,432
Prepaid expenses and other current assets	54	258
Other assets	11	(2)
Accounts payable	694	(874)
Accrued expenses	(2,946)	(3,415)
Other liabilities	(69)	(23)
Deferred revenue	(11,007)	(18,942)
Net cash provided by (used in) operating activities	3,898	(2,073)
Cash flows used in investing activities:
Purchases of property and equipment	(1,571)	(684)
Change in restricted cash	173
Net cash used in investing activities	(1,398)	(684)
Cash flows used in financing activities:
Proceeds from stock option and warrant exercises	1,168	749
Payments of capital lease obligations	(2,131)	(2,303)
Net cash used in financing activities	(963)	(1,554)
Effect of exchange rate changes on cash and cash equivalents	(136)	(498)
Net increase (decrease) in cash and cash equivalents	1,401	(4,809)
Cash and cash equivalents, beginning of period	21,785	28,753
Cash and cash equivalents, end of period	23,186	23,944
Supplemental cash flow disclosures:
Cash paid for interest	179	265
Cash paid for income taxes	1,214	1,282
Supplemental disclosure of non-cash investing activities:
Acquisition of equipment through capital leases	4,351	$ 1,700
Construction costs funded by landlord tenant improvement allowance	$ 554

XML

Accrued Expenses

9 Months Ended

Oct. 31, 2015

Payables and Accruals [Abstract]

Accrued Expenses

5. Accrued Expenses

Accrued expenses consist of the following:

	October 31, 2015		January 31, 2015
Accrued payroll	$	1,729	$	1,695
Accrued commissions and bonuses		2,152		3,150
Sales and withholding taxes		793		2,427
Accrued income taxes payable		598		597
Legal and professional		657		275
Deferred rent, current portion		38		597
Other accrued expenses		1,100		1,844
Total accrued expenses	$	7,067	$	10,585

XML

Geographic Information (Tables)

9 Months Ended

Oct. 31, 2015

Segment Reporting [Abstract]

Revenue by Geographic Area

Revenue by geographic area, attributed to individual countries based upon location of the external customer, is as follows:

	Three Months Ended October 31,				Nine Months Ended October 31,
	2015		2014		2015		2014
United States	$	5,320	$	4,332	$	13,462	$	10,616
Japan		2,917		2,339		7,396		6,857
Germany		2,431		3,026		7,081		8,555
United Kingdom		1,700		1,220		5,403		3,609
France		1,768		2,361		5,387		6,597
Korea		1,464		1,319		4,170		3,974
Sweden		420		501		1,377		1,846
Other		944		860		2,911		2,517
Total	$	16,964	$	15,958	$	47,187	$	44,571

Net Long-Lived Assets by Principal Geographic Areas

Net long-lived assets by principal geographic areas were as follows:

	October 31, 2015		January 31, 2015
United States	$	10,449	$	6,080
France		421		590
Germany		122		132
Japan		139		91
Other		63		68
Total property and equipment, net	$	11,194	$	6,961

XML

Commitments and Contingencies - Additional Information (Detail)	Aug. 01, 2015 ft²	Jul. 31, 2015 ft²	Jul. 01, 2015 USD ($) ft²	Jun. 30, 2015 USD ($) ft²	Oct. 31, 2015 USD ($)	Jan. 31, 2015 USD ($)
Contingencies And Commitments [Line Items]
Recorded liabilities for guarantees and indemnities | $					$ 0	$ 0
Corporate Headquarters [Member]
Contingencies And Commitments [Line Items]
Operating lease covers area			44,241	65,941
Operating lease covers area reduction			21,700
Tenant improvement allowance, remainder of fiscal year 2016 | $			$ 1,681,000		$ 1,681,000
Letter of credit | $			$ 352,000	$ 525,000
Office Space [Member] | Japan [Member]
Contingencies And Commitments [Line Items]
Operating lease covers area	7,512	4,047

XML

Property and Equipment, net (Tables)

9 Months Ended

Oct. 31, 2015

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment, net consists of the following:

	October 31, 2015			January 31, 2015
Computer software and equipment	$	25,668		$	20,637
Office equipment and furniture		463			422
Leasehold improvements		2,652			2,593
Construction-in-process		1,009			—
Total property and equipment		29,792			23,652
Less: accumulated depreciation		(18,598	)		(16,691	)
Property and equipment, net	$	11,194		$	6,961