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 July 31, 2016

OR

o 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  o

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  o

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

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

As of August 26, 2016, 14,820,856 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 July 31, 2016

TABLE OF CONTENTS

	Pages
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	3
Condensed Consolidated Balance Sheets (Unaudited) as of July 31, 2016 and January 31, 2016	3
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for the three and six months ended July 31, 2016 and 2015	4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended July 31, 2016 and 2015	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	27
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)

	July 31,			January 31,
	2016			2016
ASSETS
Current assets:
Cash and cash equivalents	$	33,187		$	27,649
Accounts receivable		11,655			32,072
Prepaid expenses and other current assets		2,689			3,707
Total current assets		47,531			63,428
Property and equipment, net		10,832			12,032
Intangible assets, net		1,869			2,044
Deferred tax assets		441			428
Restricted cash		352			352
Other assets		775			737
Total assets	$	61,800		$	79,021
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,151		$	3,462
Accrued expenses		7,458			12,199
Current portion of deferred revenue		26,014			32,849
Current portion of capital lease obligations		2,321			2,823
Total current liabilities		37,944			51,333
Deferred revenue		1,736			4,484
Capital lease obligations		1,657			2,549
Deferred rent		2,527			2,490
Other long-term liabilities		726			678
Total liabilities		44,590			61,534
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; 14,853,358 and    14,663,621 shares issued, respectively; 14,820,856 and 14,631,119 shares    outstanding, respectively		15			15
Additional paid-in capital		92,928			91,626
Accumulated deficit		(75,306	)		(73,685	)
Treasury stock (32,502 common shares, at cost)	0				0
Accumulated other comprehensive loss		(427	)		(469	)
Total stockholders’ equity		17,210			17,487
Total liabilities and stockholders’ equity	$	61,800		$	79,021

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

3

EXA CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share data)

	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Revenue:
License revenue	$	14,810		$	12,977		$	28,869		$	25,219
Project revenue		2,302			2,478			5,028			5,004
Total revenue		17,112			15,455			33,897			30,223
Operating expenses:
Cost of revenues		4,632			4,755			9,436			9,398
Sales and marketing		3,392			2,440			6,723			4,928
Research and development		6,023			5,952			12,234			12,122
General and administrative		3,457			3,126			6,906			6,393
Total operating expenses		17,504			16,273			35,299			32,841
Loss from operations		(392	)		(818	)		(1,402	)		(2,618	)
Other (expense) income, net
Foreign exchange (loss) gain		(22	)		(171	)		193			(223	)
Interest expense		(39	)		(54	)		(86	)		(119	)
Interest income		11			2			21			5
Other income, net		3			—			12			—
Total other (expense) income, net		(47	)		(223	)		140			(337	)
Loss before income taxes		(439	)		(1,041	)		(1,262	)		(2,955	)
Provision for income taxes		(239	)		(154	)		(359	)		(128	)
Net loss	$	(678	)	$	(1,195	)	$	(1,621	)	$	(3,083	)
Net loss per share:
Basic	$	(0.05	)	$	(0.08	)	$	(0.11	)	$	(0.21	)
Diluted	$	(0.05	)	$	(0.08	)	$	(0.11	)	$	(0.21	)
Weighted average shares outstanding used in computing net loss per share:
Basic		14,784,795			14,535,539			14,711,429			14,420,562
Diluted		14,784,795			14,535,539			14,711,429			14,420,562
Comprehensive loss:
Net loss	$	(678	)	$	(1,195	)	$	(1,621	)	$	(3,083	)
Foreign currency translation adjustment		(75	)		(12	)		42			28
Comprehensive loss	$	(753	)	$	(1,207	)	$	(1,579	)	$	(3,055	)

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

4

EXA CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Six Months Ended July 31,
	2016			2015
Cash flows provided by operating activities:
Net loss	$	(1,621	)	$	(3,083	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,991			1,528
Stock-based compensation expense		926			1,105
Deferred rent expense		230			(179	)
Deferred income taxes		(13	)		—
Net change in operating assets and liabilities:
Accounts receivable		20,004			21,302
Prepaid expenses and other current assets		997			(276	)
Other assets		(39	)		68
Accounts payable		(910	)		112
Accrued expenses		(5,102	)		(3,635	)
Other liabilities		47			(93	)
Deferred revenue		(9,777	)		(7,251	)
Net cash provided by operating activities		6,733			9,598
Cash flows used in investing activities:
Purchases of property and equipment		(836	)		(626	)
Net cash used in investing activities		(836	)		(626	)
Cash flows used in financing activities:
Proceeds from stock option and warrant exercises		356			1,130
Payments of capital lease obligations		(1,456	)		(1,301	)
Net cash used in financing activities		(1,100	)		(171	)
Effect of exchange rate changes on cash		741			(180	)
Net increase in cash and cash equivalents		5,538			8,621
Cash and cash equivalents, beginning of period		27,649			21,785
Cash and cash equivalents, end of period	$	33,187		$	30,406
Supplemental cash flow disclosures:
Cash paid for interest	$	86		$	119
Cash paid for income taxes	$	1,117		$	1,043
Supplemental disclosure of non-cash investing activities:
Decrease in unpaid purchases of property and equipment	$	(337	)	$	—

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 results 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 July 31, 2016 and for the three and six months ended July 31, 2016 and 2015 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, 2016 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, 2016 filed with the Securities and Exchange Commission on March 21, 2016.

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 Accounting Standards Update (“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, 2018, and interim periods therein. 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

6

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

(Dollars in thousands except per share amounts)

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 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.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires the recognition of lease assets and liabilities for all leases, with certain exceptions, on the balance sheet. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for annual periods beginning after December 15, 2018, and for interim periods therein. The Company is currently evaluating the requirements of this ASU and has not yet determined its impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718)—Improvements to Employee Share-Based Payment Accounting. This standard simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for interim periods therein. Early adoption is permitted. The Company is currently evaluating the requirements of this ASU and has not yet determined its impact on the Company’s consolidated financial statements.

3. Computation of Net Loss Per Share

Basic earnings per share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding (using the treasury stock method) if securities convertible into or exercisable for potentially dilutive shares of common stock (stock options, restricted stock units and warrants) had been converted into or exercisable for such shares of common stock, and if such assumed conversion or exercise would have been dilutive. Exercises or conversions that would have been anti-dilutive are excluded from the calculation of diluted EPS.

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

	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Numerator:
Net loss	$	(678	)	$	(1,195	)	$	(1,621	)	$	(3,083	)
Denominator:
Weighted average common shares, basic and diluted		14,784,795			14,535,539			14,711,429			14,420,562
Basic and diluted net loss per share	$	(0.05	)	$	(0.08	)	$	(0.11	)	$	(0.21	)

7

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

(Dollars in thousands except per share amounts)

The table below represents outstanding options, restricted stock unit awards and warrants that were excluded from the computation of diluted net loss 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 as of July 31, 2016 and 2015 due to the net loss position of the Company.

	As of July 31,
	2016		2015
Options, restricted stock unit awards and warrants to    purchase common and preferred stock		1,985,605		2,471,058

4. Property and Equipment, net

Property and equipment, net consists of the following:

	July 31, 2016			January 31, 2016
Computer software and equipment	$	18,316		$	17,964
Office equipment and furniture		1,556			1,349
Leasehold improvements		1,632			1,562
Construction-in-process		270			169
Total property and equipment		21,774			21,044
Less accumulated depreciation		(10,942	)		(9,012	)
Property and equipment, net	$	10,832		$	12,032

For the three and six months ended July 31, 2016, depreciation expense was $892 and $1,816, respectively. For the three and six months ended July 31, 2015, depreciation expense was $690 and $1,353, respectively. Included in computer software and equipment and office equipment and furniture is equipment held pursuant to capital leases with costs of $14,901 and $14,809 and accumulated depreciation of $8,105 and $6,808 as of July 31, 2016 and January 31, 2016, respectively.

5. Accrued Expenses

Accrued expenses consist of the following:

	July 31, 2016		January 31, 2016
Accrued payroll	$	2,357	$	1,828
Sales and value added taxes		1,444		4,075
Accrued commissions and bonuses		1,272		3,900
Accrued income taxes payable		652		541
Deferred rent, current portion		380		186
Legal and professional		553		805
Other		800		864
Total accrued expenses	$	7,458	$	12,199

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. For purposes of recognizing incentives and minimum rental expenses on a straight-line basis, the Company uses the date it obtains the legal right to use and control the leased space to begin amortization. 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

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

(Dollars in thousands except per share amounts)

Deferred rent consists of the following:

	July 31, 2016			January 31, 2016
Leasehold improvement incentive	$	1,711		$	1,839
Non-cash rent expense		1,196			837
Total deferred rent		2,907			2,676
Less current portion included in accrued expenses		(380	)		(186	)
Deferred rent, net of current portion	$	2,527		$	2,490

7. Fair Value Measurements

Financial instruments consist primarily of cash and cash equivalents, accounts receivable and capital lease obligations. As of July 31, 2016 and January 31, 2016, 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 July 31, 2016:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	15,036	$	15,036	$	—	$	—

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of January 31, 2016:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	11,019	$	11,019	$	—	$	—

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

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

(Dollars in thousands except per share amounts)

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 July 31, 2016: 

	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,636	)	$	1,869
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,674	)	$	1,869

The following table reflects the carrying value of intangible assets as of January 31, 2016:

	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,461	)	$	2,044
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,499	)	$	2,044

For the three and six months ended July 31, 2016, amortization expense of intangible assets was $88 and $175, respectively. For the three and six months ended July 31, 2015, amortization expense of intangible assets was $87 and $175, respectively.

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.

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 July 31, 2016 and January 31, 2016, the Company has not recorded any liabilities for these indemnities.

Operating Leases

Effective July 1, 2016, the Company entered into an agreement to lease space and high performance computing capacity at a data center located in Virginia. The three-year agreement will provide access to up to 300 KW hours of computing capacity, which the Company believes will be suitable and adequate to meet the growing demands of its customers.

10

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

(Dollars in thousands except per share amounts)

As of July 31, 2016, after taking into consideration the above agreement, total future minimum lease payments under non-cancelable lease arrangements are as follows:

Year ended January 31,
2017 (Remainder as of July 31, 2016)	$	2,557
2018		5,865
2019		5,479
2020		3,889
2021		2,033
Thereafter		4,806
	$	24,629

10. Stock-Based Compensation

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

	Six Months Ended July 31,
	2016		2015
Expected life (years)		6.25		6.25
Risk-free interest rate		1.7%		2.0%
Expected volatility		35.1%		38.1%
Expected dividend yield		0.0%		0.0%

The weighted-average grant date fair value per share for service-based stock options granted in the three and six months ended July 31, 2016 was $4.66 and $4.29, respectively. The weighted-average grant date fair value per share for service-based stock options granted in the three and six months ended July 31, 2015 was $4.53 and $4.44, respectively.

For standard service-based stock options and restricted stock units, 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 is 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 2017 based on achieved performance metrics. As of July 31, 2016, the Company has concluded that it is not probable that the required metrics for vesting of the remaining unvested options will be achieved. As such, the Company has not recognized any additional share-based compensation expense associated with the unvested portion of these performance-based options.

During the first quarter of fiscal year 2017, the Company granted performance-based restricted stock units (“PSUs”). PSUs are recognized as expense when it becomes probable that performance measures triggering vesting will be achieved. As of July 31, 2016, the Company has concluded that it is not probable that any of the required metrics for vesting of the PSUs will be achieved. As a result, the Company has not recognized any share-based compensation expense associated with these awards.

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2016		2015		2016		2015
Cost of revenues	$	39	$	53	$	83	$	122
Sales and marketing		58		85		148		200
Research and development		162		185		345		426
General and administrative		178		168		350		357
Total	$	437	$	491	$	926	$	1,105

11

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

(Dollars in thousands except per share amounts)

The total unrecognized compensation cost related to outstanding stock options and service-based restricted stock units is $2,537 at July 31, 2016. This amount is expected to be recognized over a weighted-average period of 1.69 years.

11. Income Taxes

For the three and six months ended July 31, 2016, the Company’s income tax provision was $239 and $359, respectively. For the three and six months ended July 31, 2015, the income tax provision was $154 and $128, respectively. The provision for all 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, 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 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 July 31, 2016, 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 further 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 July 31,				Six Months Ended July 31,
	2016		2015		2016		2015
United States	$	4,414	$	4,298	$	8,721	$	8,141
Germany		2,743		2,461		5,292		4,650
Japan		2,896		2,138		6,322		4,479
France		2,025		1,841		3,912		3,620
Korea		1,455		1,412		2,792		2,705
United Kingdom		1,738		1,842		3,382		3,703
Sweden		429		482		847		957
Other		1,412		981		2,629		1,968
	$	17,112	$	15,455	$	33,897	$	30,223

12

EXA CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited) — (Continued)

(Dollars in thousands except per share amounts)

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:

	July 31,		January 31,
	2016		2016
United States	$	10,210	$	11,346
France		303		388
Germany		118		110
Japan		114		116
Other		87		72
	$	10,832	$	12,032

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 21, 2016. 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 150 manufacturers currently utilize our products and services, including 14 of the global top 15 passenger vehicle manufacturer groups such as BMW, Ford, Hyundai, Jaguar Land Rover, Nissan, Porsche, Renault, Toyota and Volkswagen; truck and off-highway vehicle manufacturers such as Hyundai, Kenworth, Kobelco, MAN, Peterbilt, Scania and Volvo Truck; and suppliers to these manufacturers, such as Cummins, Denso and Delphi. We are also exploring other markets in which we believe the capabilities of PowerFLOW 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 term licenses, with a minority utilizing multi-year arrangements or a “pay as you go” model. 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 PowerFLOW ExaCLOUD offering. To introduce new customers to our simulation solutions, we typically perform fixed-price projects that include simulation services, along with engineering and consulting services. ExaCLOUD continues to play an increasingly important role in our new customer acquisition go-to-market model, as virtually all of our projects are now being delivered using that facility, thereby familiarizing our customers with its capabilities. Customers typically license our products for one application, such as aerodynamics, and over time expand to other applications such as thermal management or aeroacoustics.

14

During the six months ended July 31, 2016, 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 in prior fiscal years are yielding growth in both project and license revenue. The weakening U.S. dollar, particularly against the Euro and yen, had a material positive 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 and reflects the impact of the stronger Euro and yen. During the six months ended July 31, 2016 and 2015, 75% and 72% of our revenue, respectively, came from outside of the Americas. Revenue for the six months ended July 31, 2016 was $33.9 million, with growth of 12.2% over the same period a year ago and 10.3% 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 six months ended July 31, 2016 decreased approximately 4.6% when compared to the same period last year. This decrease is a result of our prior investments 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 weakening dollar had the effect of increasing total operating expenses when compared to the same period last year. For the six months ended July 31, 2016, total operating expenses were $35.3 million, with growth of 7.5% over the same period a year ago and 7.1% 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 six months ended July 31, 2016 was 4.6% lower than the same period last year, primarily as a result of the foreign currency impacts described above. Adjusted EBITDA for the six months ended July 31, 2016, as described in “Non-GAAP Measures” below, was improved at $1.5 million when compared to less than $0.1 million in the same period last year.

We ended the quarter with cash and cash equivalents of $33.2 million compared to $27.6 million as of January 31, 2016. This reflects strong accounts receivable collections activity and normal seasonal cash flows. Capital expenditures increased during the six months ended July 31, 2016 over the same period last year, primarily due to investments related to renovations to our headquarters office in Burlington, Massachusetts.

Results of operations for the three months ended July 31, 2016 and 2015

The following table sets forth, for the periods presented, data from our consolidated statements of operations:

	Three Months Ended July 31,
(in thousands)	2016			2015
Revenue:
License revenue	$	14,810		$	12,977
Project revenue		2,302			2,478
Total revenues		17,112			15,455
Operating expenses: (1)
Cost of revenues		4,632			4,755
Sales and marketing		3,392			2,440
Research and development		6,023			5,952
General and administrative (2)		3,457			3,126
Total operating expenses		17,504			16,273
Loss from operations		(392	)		(818	)
Other expense, net
Foreign exchange loss		(22	)		(171	)
Interest expense		(39	)		(54	)
Interest income		11			2
Other income, net		3			—
Total other expense, net		(47	)		(223	)
Loss before income taxes		(439	)		(1,041	)
Provision for income taxes		(239	)		(154	)
Net loss	$	(678	)	$	(1,195	)

15

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

	Three Months Ended July 31,
(in thousands)	2016		2015
Cost of revenues	$	39	$	53
Sales and marketing		58		85
Research and development		162		185
General and administrative		178		168
Total stock-based compensation expense	$	437	$	491

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

	Three Months Ended July 31,
(in thousands)	2016		2015
General and administrative	$	88	$	87

The following table sets forth, for the periods presented, data from our consolidated statements of operations as a percentage of total revenues:

	Three Months Ended July 31,
(as a percent of total revenue)	2016			2015
Revenue:
License revenue		86.5	%		84.0	%
Project revenue		13.5			16.0
Total revenues		100.0			100.0
Operating expenses:
Cost of revenues		27.1			30.8
Sales and marketing		19.8			15.8
Research and development		35.2			38.5
General and administrative		20.2			20.2
Total operating expenses		102.3			105.3
Loss from operations		(2.3	)		(5.3	)
Other expense, net
Foreign exchange loss		(0.1	)		(1.1	)
Interest expense		(0.2	)		(0.3	)
Interest income		0.1			0.0
Other income, net		0.0			—
Total other expense, net		(0.3	)		(1.4	)
Loss before income taxes		(2.6	)		(6.7	)
Provision for income taxes		(1.4	)		(1.0	)
Net loss		(4.0	)%		(7.7	)%

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

Comparison of three months ended July 31, 2016 and 2015

Revenue

	Three Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change			% Change
License revenue	$	14,810	$	12,977	$	1,833			14.1	%
Project revenue		2,302		2,478		(176	)		-7.1	%
Total revenues	$	17,112	$	15,455	$	1,657			10.7	%

License revenue increased 14.1% from $13.0 million for the three months ended July 31, 2015 to $14.8 million for the three months ended July 31, 2016. The $1.8 million increase was driven almost entirely by increased consumption of simulation capacity by existing customers and the addition of 16 new license customers during the period. Deployment continues to expand in our core

16

customer base across our portfolio of applications. We experienced particularly strong demand in our Asian markets. Project revenue for the three months ended July 31, 2016 decreased by approximately $0.2 million, which reflects our slowed investment in project capacity in fiscal year 2017, and we will continue to anticipate slowed project revenue growth in fiscal year 2017 as a result. However, our project delivery capability continues to recycle into new opportunities to drive license growth. Both license and project revenue, particularly new customer opportunities, are leveraging the capabilities of our ExaCLOUD platform. Virtually all of our projects are now being delivered using ExaCLOUD exposing our customers to its capabilities. ExaCLOUD continues to play an increasingly important role in our new customer acquisition go-to-market model.

Foreign exchange fluctuations, particularly the strengthening of the Euro and the Japanese yen against the U.S. dollar, positively impacted total revenue in the three months ended July 31, 2016 by $0.4 million as compared to the three months ended July 31, 2015. On a constant currency basis, our total revenues in the three months ended July 31, 2016 increased 8.1% compared with the three months ended July 31, 2015.

Cost of revenues

	Three Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change			% Change
Cost of revenues	$	4,632	$	4,755	$	(123	)		-2.6	%

Cost of revenues for the three months ended July 31, 2016 was $4.6 million, a decrease of approximately $0.2 million, or 2.6%, compared with $4.8 million during the three months ended July 31, 2015. As a percentage of revenues, cost of revenues decreased to 27.1% for the three months ended July 31, 2016 compared to 30.8% for the three months ended July 31, 2015. The decrease is attributable to approximately $0.6 million of decreased personnel-related costs associated with the reassignment of certain application engineers into dedicated customer-facing sales roles. The decrease was partially offset by increased costs of approximately $0.3 million related to the hiring of new application engineers and approximately $0.2 million related to increased royalty expenses associated with higher customer license levels and expanded use of an embedded sublicensed product.

Sales and marketing

	Three Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
Sales and marketing	$	3,392	$	2,440	$	952		39.0	%

Sales and marketing expenses for the three months ended July 31, 2016 were $3.4 million, an increase of $1.0 million, or 39%, compared with $2.4 million during the three months ended July 31, 2015. As a percentage of revenues, sales and marketing expenses increased to 19.8% for the three months ended July 31, 2016 compared to 15.8% for the three months ended July 31, 2015. The period-over-period increase is attributable to increased personnel-related costs of approximately $0.6 million associated with the reassignment of certain application engineers into dedicated customer-facing sales roles, increased other sales and marketing costs of approximately $0.2 million associated with expanded marketing initiatives, and increased severance and travel costs of approximately $0.2 million.

Research and development

	Three Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
Research and development	$	6,023	$	5,952	$	71		1.2	%

Research and development expenses for the three months ended July 31, 2016 were $6.0 million and remained relatively flat compared with the same period a year ago. As a percentage of revenues, research and development expense decreased to 35.2% for the three months ended July 31, 2016 compared to 38.5% for the three months ended July 31, 2015.

General and administrative

	Three Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
General and administrative	$	3,457	$	3,126	$	331		10.6	%

17

General and administrative expenses for the three months ended July 31, 2016 were $3.5 million, an increase of $0.3 million, or 10.6%, compared to $3.1 million for the three months ended July 31, 2015. As a percentage of revenues, general and administrative expenses remained flat at 20.2% for the three months ended July 31, 2016 compared with the three months ended July 31, 2015. The increase in general and administrative expenses is primarily attributable to a $0.2 million increase in employee-related expenses due to annual merit increases and increased stock-based compensation expense, along with a $0.1 million increase in other costs, including professional fees associated with accounting and routine legal matters and pre-launch hosting costs associated with the commencement of a new agreement at our new data center in Virginia.

Total other (expense) income, net

	Three Months Ended July 31,
(in thousands, except percentages)	2016			2015			Change		% Change
Total other (expense) income, net	$	(47	)	$	(223	)	$	176		(78.9	)%

Total other (expense) income, net for the three months ended July 31, 2016 was less than $(0.1) million compared to total other (expense) income, net of $(0.2) million for the three months ended July 31, 2015. Total other (expense) income, 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 (expense) income, net is primarily attributed to foreign exchange fluctuations in the Euro and Japanese yen.

Provision for income taxes

	Three Months Ended July 31,
(in thousands, except percentages)	2016			2015			Change			% Change
Provision for income taxes	$	(239	)	$	(154	)	$	(85	)		55.2	%

For the three months ended July 31, 2016 and 2015, our income tax provision was $0.2 million. 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 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 July 31, 2016, 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 further 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.

18

Results of operations for the six months ended July 31, 2016 and 2015

The following table sets forth, for the periods presented, data from our consolidated statements of operations:

	Six Months Ended July 31,
(in thousands)	2016			2015
Revenue:
License revenue	$	28,869		$	25,219
Project revenue		5,028			5,004
Total revenues		33,897			30,223
Operating expenses: (1)
Cost of revenues		9,436			9,398
Sales and marketing		6,723			4,928
Research and development		12,234			12,122
General and administrative (2)		6,906			6,393
Total operating expenses		35,299			32,841
Loss from operations		(1,402	)		(2,618	)
Other income (expense), net
Foreign exchange gain (loss)		193			(223	)
Interest expense		(86	)		(119	)
Interest income		21			5
Other income, net		12			—
Total other income (expense), net		140			(337	)
Loss before income taxes		(1,262	)		(2,955	)
Provision for income taxes		(359	)		(128	)
Net loss	$	(1,621	)	$	(3,083	)

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

	Six Months Ended July 31,
(in thousands)	2016		2015
Cost of revenues	$	83	$	122
Sales and marketing		148		200
Research and development		345		426
General and administrative		350		357
Total stock-based compensation expense	$	926	$	1,105

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

	Six Months Ended July 31,
(in thousands)	2016		2015
General and administrative	$	175	$	175

19

The following table sets forth, for the periods presented, data from our consolidated statements of operations as a percentage of total revenues:

	Six Months Ended July 31,
(as a percent of total revenue)	2016			2015
Revenue:
License revenue		85.2	%		83.4	%
Project revenue		14.8			16.6
Total revenues		100.0			100.0
Operating expenses:
Cost of revenues		27.8			31.1
Sales and marketing		19.8			16.3
Research and development		36.1			40.1
General and administrative		20.4			21.2
Total operating expenses		104.1			108.7
Loss from operations		(4.1	)		(8.7	)
Other income (expense), net
Foreign exchange gain (loss)		0.6			(0.7	)
Interest expense		(0.3	)		(0.4	)
Interest income		0.1			0.0
Other income, net		0.0			—
Total other income (expense), net		0.4			(1.1	)
Loss before income taxes		(3.7	)		(9.8	)
Provision for income taxes		(1.1	)		(0.4	)
Net loss		(4.8	)%		(10.2	)%

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

Comparison of six months ended July 31, 2016 and 2015

Revenue

	Six Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
License revenue	$	28,869	$	25,219	$	3,650		14.5	%
Project revenue		5,028		5,004		24		0.5	%
Total revenues	$	33,897	$	30,223	$	3,674		12.2	%

License revenue increased 14.5% from $25.2 million for the six months ended July 31, 2015 to $28.9 million for the six months ended July 31, 2016. The $3.7 million increase was driven almost entirely by increased consumption of simulation capacity by existing customers and the addition of 18 new license customers during the period. Deployment continues to expand in our core customer base across our portfolio of applications. We experienced particularly strong demand in our Asian markets. Project revenue for the six months ended July 31, 2016 was relatively flat. We anticipate slowed project revenue growth in fiscal year 2017 as our investment in project capacity has slowed. However, our project delivery capability continues to drive new license opportunities. Both license and project revenue, particularly new customer opportunities, are leveraging the capabilities of our ExaCLOUD platform. Virtually all of our projects are now being delivered using ExaCLOUD exposing our customers to its capabilities. ExaCLOUD continues to play an increasingly important role in our new customer acquisition go-to-market model.

Foreign exchange fluctuations, particularly the strengthening of the Euro and the Japanese yen against the U.S. dollar, positively impacted total revenue in the six months ended July 31, 2016 by $0.6 million as compared to the six months ended July 31, 2015. On a constant currency basis, our total revenues in the six months ended July 31, 2016 increased 10.3% compared with the six months ended July 31, 2015.

20

Cost of revenues

	Six Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
Cost of revenues	$	9,436	$	9,398	$	38		0.4	%

Cost of revenues for the six months ended July 31, 2016 was $9.4 million and remained relatively flat compared with the same period a year ago. As a percentage of revenues, cost of revenues decreased to 27.8% for the six months ended July 31, 2016 compared to 31.1% for the six months ended July 31, 2015. While the overall costs were flat, increases in depreciation expense of $0.3 million attributable to additional computing equipment for our high performance data center in New Jersey and increases in royalty costs of $0.3 million were completely offset by decreases in other costs, primarily personnel-related costs attributable to the reassignment of certain application engineers into dedicated customer-facing sales roles.

Sales and marketing

	Six Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
Sales and marketing	$	6,723	$	4,928	$	1,795		36.4	%

Sales and marketing expenses for the six months ended July 31, 2016 were $6.7 million, an increase of $1.8 million, or 36.4%, compared with $4.9 million during the six months ended July 31, 2015. As a percentage of revenues, sales and marketing expenses increased to 19.8% for the six months ended July 31, 2016 compared to 16.3% for the six months ended July 31, 2015. The period-over-period increase in cost was driven by an increase of $0.9 million in non-commissioned employee compensation expense due to merit increases and the reassignment of certain application engineers into dedicated customer-facing sales roles. The increase was also driven by a $0.5 million increase in commission expense due to increased orders, along with a $0.3 million increase in travel expenses due to expanded customer sales initiatives and a larger headcount, and a $0.1 million increase for severance expense.

Research and development

	Six Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
Research and development	$	12,234	$	12,122	$	112		0.9	%

Research and development expenses for the six months ended July 31, 2016 were $12.2 million, an increase of $0.1 million, or 0.9%, compared with $12.1 million during the six months ended July 31, 2015. As a percentage of revenues, research and development expenses decreased to 36.1% for the six months ended July 31, 2016 compared to 40.1% for the six months ended July 31, 2015. The period-over-period increase in cost was primarily attributable to a $0.2 million increase in software consulting expense, partially offset by a $0.1 million decrease in facilities expenses, primarily due to savings resulting from an amendment to our agreement for our high performance computing data center in New Jersey.

General and administrative

	Six Months Ended July 31,
(in thousands, except percentages)	2016		2015		Change		% Change
General and administrative	$	6,906	$	6,393	$	513		8.0	%

General and administrative expenses for the six months ended July 31, 2016 were $6.9 million, an increase of $0.5 million, or 8.0%, compared to $6.4 million for the six months ended July 31, 2015. As a percentage of revenues, general and administrative expenses decreased to 20.4% for the six months ended July 31, 2016 compared to 21.2% for the six months ended July 31, 2015. The period-over-period increase in cost is primarily attributable to $0.2 million of increased employee-related expenses due to the net addition of five new employees and annual merit increases, $0.1 million of increased professional fees associated with patent procurement, $0.1 million in pre-launch hosting costs associated with the commencement of a new agreement at our new data center in Virginia, and $0.1 million in increased costs associated with new service and maintenance contracts.

21

Total other (expense) income, net

	Six Months Ended July 31,
(in thousands, except percentages)	2016		2015			Change		% Change
Total other (expense) income, net	$	140	$	(337	)	$	477		(141.5	)%

Total other (expense) income, net for the six months ended July 31, 2016 was $0.1 million compared to total other (expense) income, net of $(0.3) million for the six months ended July 31, 2015. Total other (expense) income, 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 (expense) income, net is primarily attributed to foreign exchange fluctuations in the Euro and Japanese yen.

Provision for income taxes

	Six Months Ended July 31,
(in thousands, except percentages)	2016			2015			Change			% Change
Provision for income taxes	$	(359	)	$	(128	)	$	(231	)		180.5	%

For the six months ended July 31, 2016, our income tax provision was $0.4 million. For the six months ended July 31, 2015, our income tax provision was $0.1 million. 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 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 July 31, 2016, 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

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.

Revenue and total operating expenses on a constant currency basis. Our international operations generate revenue 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

22

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 six months ended July 31, 2016 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 period, rather than the exchange rates actually in effect during the current fiscal period.

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

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

Non-GAAP net loss. We define non-GAAP net loss as GAAP net loss 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 is net loss.

Non-GAAP net loss per diluted share. We define non-GAAP net loss per diluted share as GAAP net loss 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 per diluted share is net loss per diluted share.

23

Our management uses these non-GAAP financial measures to evaluate our operating performance and for internal planning and forecasting purposes. By excluding material non-cash expenses related to stock-based compensation and depreciation, we believe that these measures more clearly reflect the 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, a good measure of our historical operating trends and a more consistent proxy for cash outflows. However, each of these non-GAAP financial measures may have limitations as an analytical tool. In considering our Adjusted EBITDA, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per diluted share, investors should take into account the following reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures:

	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
(in thousands)
Net loss	$	(678	)	$	(1,195	)	$	(1,621	)	$	(3,083	)
Add back:
Depreciation and amortization		980			778			1,991			1,528
Interest expense, net		28			52			65			114
Other income, net		(3	)		—			(12	)		—
Foreign exchange loss (gain)		22			171			(193	)		223
Provision for income taxes		239			154			359			128
EBITDA		588			(40	)		589			(1,090	)
Stock-based compensation expense		437			491			926			1,105
Adjusted EBITDA	$	1,025		$	451		$	1,515		$	15
Non-GAAP operating income (loss):	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
(in thousands)
Operating loss	$	(392	)	$	(818	)	$	(1,402	)	$	(2,618	)
Add back:
Stock-based compensation expense		437			491			926			1,105
Amortization of acquired intangible assets	88			87			175			175
Non-GAAP operating income (loss)	$	133		$	(240	)	$	(301	)	$	(1,338	)
Non-GAAP net loss:	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
(in thousands)
Net loss		(678	)		(1,195	)		(1,621	)		(3,083	)
Add back:
Stock-based compensation expense		437			491			926			1,105
Amortization of acquired intangible assets		88			87			175			175
Income tax effect (1)		(184	)		(199	)		(385	)		(445	)
Non-GAAP net loss	$	(337	)	$	(816	)	$	(905	)	$	(2,248	)
Non-GAAP net loss, per diluted share:	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Net loss, per diluted share (2)	$	(0.05	)	$	(0.08	)	$	(0.11	)	$	(0.21	)
Add back:
Stock-based compensation expense		0.03			0.03			0.06			0.08
Amortization of acquired intangible assets		0.01			0.01			0.01			0.01
Income tax effect (1)		(0.01	)		(0.02	)		(0.03	)		(0.03	)
Non-GAAP net loss, per diluted share (2)(3):	$	(0.02	)	$	(0.06	)	$	(0.06	)	$	(0.16	)

(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 annual 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

24

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 14.8 million and 14.5 million for the three months ended July 31, 2016 and 2015, respectively, and 14.7 million and 14.4 million for the six months ended July 31, 2016 and 2015, respectively.

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

Liquidity

Overview

Our primary sources of liquidity during the six months ended July 31, 2016 were cash and cash equivalents on hand, cash flows provided by operating activities and cash proceeds from stock option exercises. Our primary uses of cash during the six months ended July 31, 2016 were capital expenditures and payments of capital lease obligations. As of July 31, 2016, we had $33.2 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. We may sell shares of our common stock pursuant to this registration statement at any time through December 10, 2016, the third anniversary of the effective date of the registration statement.

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 six months ended July 31, 2016 and 2015 was $6.7 million and $9.6 million, respectively. The decrease 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 six months ended July 31, 2016 and 2015 was $0.8 million and $0.6 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.

Net Cash Flows from Financing Activities

Net cash used in financing activities for the six months ended July 31, 2016 was $1.1 million, which consisted of payments on our capital lease obligations of $1.5 million, partially offset by proceeds from stock option exercises of $0.4 million. Net cash used in financing activities for the six months ended July 31, 2015 was $0.2 million, which consisted of $1.3 million of payments on our capital lease obligations, partially offset by proceeds from stock options and warrant exercises of $1.1 million.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of either July 31, 2016 or January 31, 2016.

25

Contractual Commitments

Operating Leases

Effective July 1, 2016, we entered into an agreement to lease space and high performance computing capacity at a data center located in Virginia. The three-year agreement will provide access to up to 300 KW hours of computing capacity, which we believe will be suitable and adequate to meet the growing demands of our customers.

As of July 31, 2016, after taking into consideration the above agreement, total future minimum lease payments under non-cancelable lease arrangements are as follows (in millions):

Year ended January 31,
2017 (Remainder as of July 31, 2016)	$	2.6
2018		5.9
2019		5.5
2020		3.9
2021		2.0
Thereafter		4.7
	$	24.6

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“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, 2018, and interim periods therein. 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). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard when it becomes effective.

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, we 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 our 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 our financial statements or disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires the recognition of lease assets and liabilities for all leases, with certain exceptions, on the balance sheet. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for annual periods beginning after December 15, 2018, and for interim periods therein. We are currently evaluating the requirements of this ASU and have not yet determined its impact on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718)—Improvements to Employee Share-Based Payment Accounting. This standard simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for interim periods therein. Early adoption is permitted. We are currently evaluating the requirements of this ASU and have not yet determined its impact on our consolidated financial statements.

26

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 July 31, 2016 and January 31, 2016, $11.0 million and $12.8 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.

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 1.1% stronger against the United States dollar, on average, for the six months ended July 31, 2016, when compared with the six months ended July 31, 2015. The resulting net overall impact to revenue and operating expense was an increase of $0.1 million, respectively, during the six months ended July 31, 2016.

The exchange rate impact of other currencies for the six months ended July 31, 2016, primarily driven by a stronger Japanese yen, was an increase to revenue and operating expense of approximately $0.4 million and $0.1 million, respectively.

For the six months ended July 31, 2016, 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 $1.9 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.

27

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 July 31, 2016 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 July 31, 2016.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended July 31, 2016 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

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2016, filed with the SEC on March 21, 2016 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.

Our business could be negatively impacted by the United Kingdom’s vote to exit the European Union.

On June 23, 2016, voters in the U.K. approved an advisory vote calling for that country’s exit from the E.U., commonly referred to as “Brexit”. As a result of the referendum, it is expected that the British government will begin negotiating the terms of the U.K.’s future relationship with the E.U. Although it is unknown what those terms will be, the effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets either during a transitional period or more permanently. The measures could potentially disrupt the markets we serve and the jurisdictions in which we operate and adversely change tax benefits or liabilities in these or other jurisdictions, and may cause us to lose customers and employees. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate.

The announcement of Brexit has created, and terms of the U.K.’s relationship with the E.U. may continue to create, global economic uncertainty, which may cause our customers to closely monitor their costs and reduce their spending budget on our offerings. Any of these effects of Brexit, among others, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

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 July 31, 2016.

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: August 29, 2016

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:	August 29, 2016

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:	August 29, 2016

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 July 31, 2016, 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: August 29, 2016

/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 July 31, 2016, 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 July 31, 2016, 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: August 29, 2016

/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 July 31, 2016, 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

Document and Entity Information - shares	6 Months Ended
	Jul. 31, 2016	Aug. 26, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
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		14,820,856

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Current assets:
Cash and cash equivalents	$ 33,187	$ 27,649
Accounts receivable	11,655	32,072
Prepaid expenses and other current assets	2,689	3,707
Total current assets	47,531	63,428
Property and equipment, net	10,832	12,032
Intangible assets, net	1,869	2,044
Deferred tax assets	441	428
Restricted cash	352	352
Other assets	775	737
Total assets	61,800	79,021
Current liabilities:
Accounts payable	2,151	3,462
Accrued expenses	7,458	12,199
Current portion of deferred revenue	26,014	32,849
Current portion of capital lease obligations	2,321	2,823
Total current liabilities	37,944	51,333
Deferred revenue	1,736	4,484
Capital lease obligations	1,657	2,549
Deferred rent	2,527	2,490
Other long-term liabilities	726	678
Total liabilities	44,590	61,534
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; 14,853,358 and 14,663,621 shares issued, respectively; 14,820,856 and 14,631,119 shares outstanding, respectively	15	15
Additional paid-in capital	92,928	91,626
Accumulated deficit	(75,306)	(73,685)
Treasury stock (32,502 common shares, at cost)	0	0
Accumulated other comprehensive loss	(427)	(469)
Total stockholders’ equity	17,210	17,487
Total liabilities and stockholders’ equity	$ 61,800	$ 79,021

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jul. 31, 2016	Jan. 31, 2016
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	14,853,358	14,663,621
Common stock, shares outstanding	14,820,856	14,631,119
Treasury stock, shares	32,502	32,502

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Revenue:
License revenue	$ 14,810	$ 12,977	$ 28,869	$ 25,219
Project revenue	2,302	2,478	5,028	5,004
Total revenue	17,112	15,455	33,897	30,223
Operating expenses:
Cost of revenues	4,632	4,755	9,436	9,398
Sales and marketing	3,392	2,440	6,723	4,928
Research and development	6,023	5,952	12,234	12,122
General and administrative	3,457	3,126	6,906	6,393
Total operating expenses	17,504	16,273	35,299	32,841
Loss from operations	(392)	(818)	(1,402)	(2,618)
Other (expense) income, net
Foreign exchange (loss) gain	(22)	(171)	193	(223)
Interest expense	(39)	(54)	(86)	(119)
Interest income	11	2	21	5
Other income, net	3		12
Total other (expense) income, net	(47)	(223)	140	(337)
Loss before income taxes	(439)	(1,041)	(1,262)	(2,955)
Provision for income taxes	(239)	(154)	(359)	(128)
Net loss	$ (678)	$ (1,195)	$ (1,621)	$ (3,083)
Net loss per share:
Basic	$ (0.05)	$ (0.08)	$ (0.11)	$ (0.21)
Diluted	$ (0.05)	$ (0.08)	$ (0.11)	$ (0.21)
Weighted average shares outstanding used in computing net loss per share:
Basic	14,784,795	14,535,539	14,711,429	14,420,562
Diluted	14,784,795	14,535,539	14,711,429	14,420,562
Comprehensive loss:
Net loss	$ (678)	$ (1,195)	$ (1,621)	$ (3,083)
Foreign currency translation adjustment	(75)	(12)	42	28
Comprehensive loss	$ (753)	$ (1,207)	$ (1,579)	$ (3,055)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Cash flows provided by operating activities:
Net loss	$ (1,621)	$ (3,083)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,991	1,528
Stock-based compensation expense	926	1,105
Deferred rent expense	230	(179)
Deferred income taxes	(13)
Net change in operating assets and liabilities:
Accounts receivable	20,004	21,302
Prepaid expenses and other current assets	997	(276)
Other assets	(39)	68
Accounts payable	(910)	112
Accrued expenses	(5,102)	(3,635)
Other liabilities	47	(93)
Deferred revenue	(9,777)	(7,251)
Net cash provided by operating activities	6,733	9,598
Cash flows used in investing activities:
Purchases of property and equipment	(836)	(626)
Net cash used in investing activities	(836)	(626)
Cash flows used in financing activities:
Proceeds from stock option and warrant exercises	356	1,130
Payments of capital lease obligations	(1,456)	(1,301)
Net cash used in financing activities	(1,100)	(171)
Effect of exchange rate changes on cash	741	(180)
Net increase in cash and cash equivalents	5,538	8,621
Cash and cash equivalents, beginning of period	27,649	21,785
Cash and cash equivalents, end of period	33,187	30,406
Supplemental cash flow disclosures:
Cash paid for interest	86	119
Cash paid for income taxes	1,117	$ 1,043
Supplemental disclosure of non-cash investing activities:
Decrease in unpaid purchases of property and equipment	$ (337)

XML

Description of Business

6 Months Ended

Jul. 31, 2016

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 results 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

Summary of Significant Accounting Policies

6 Months Ended

Jul. 31, 2016

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 July 31, 2016 and for the three and six months ended July 31, 2016 and 2015 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, 2016 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, 2016 filed with the Securities and Exchange Commission on March 21, 2016.

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 Accounting Standards Update (“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, 2018, and interim periods therein. 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 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.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires the recognition of lease assets and liabilities for all leases, with certain exceptions, on the balance sheet. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for annual periods beginning after December 15, 2018, and for interim periods therein. The Company is currently evaluating the requirements of this ASU and has not yet determined its impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718)—Improvements to Employee Share-Based Payment Accounting. This standard simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for interim periods therein. Early adoption is permitted. The Company is currently evaluating the requirements of this ASU and has not yet determined its impact on the Company’s consolidated financial statements.

XML

Computation of Net Loss Per Share

6 Months Ended

Jul. 31, 2016

Earnings Per Share [Abstract]

Computation of Net Loss Per Share

3. Computation of Net Loss Per Share

Basic earnings per share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding (using the treasury stock method) if securities convertible into or exercisable for potentially dilutive shares of common stock (stock options, restricted stock units and warrants) had been converted into or exercisable for such shares of common stock, and if such assumed conversion or exercise would have been dilutive. Exercises or conversions that would have been anti-dilutive are excluded from the calculation of diluted EPS.

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

	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Numerator:
Net loss	$	(678	)	$	(1,195	)	$	(1,621	)	$	(3,083	)
Denominator:
Weighted average common shares, basic and diluted		14,784,795			14,535,539			14,711,429			14,420,562
Basic and diluted net loss per share	$	(0.05	)	$	(0.08	)	$	(0.11	)	$	(0.21	)

The table below represents outstanding options, restricted stock unit awards and warrants that were excluded from the computation of diluted net loss 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 as of July 31, 2016 and 2015 due to the net loss position of the Company.

	As of July 31,
	2016		2015
Options, restricted stock unit awards and warrants to    purchase common and preferred stock		1,985,605		2,471,058

XML

Property and Equipment, net

6 Months Ended

Jul. 31, 2016

Property Plant And Equipment [Abstract]

Property and Equipment, net

4. Property and Equipment, net

Property and equipment, net consists of the following:

	July 31, 2016			January 31, 2016
Computer software and equipment	$	18,316		$	17,964
Office equipment and furniture		1,556			1,349
Leasehold improvements		1,632			1,562
Construction-in-process		270			169
Total property and equipment		21,774			21,044
Less accumulated depreciation		(10,942	)		(9,012	)
Property and equipment, net	$	10,832		$	12,032

For the three and six months ended July 31, 2016, depreciation expense was $892 and $1,816, respectively. For the three and six months ended July 31, 2015, depreciation expense was $690 and $1,353, respectively. Included in computer software and equipment and office equipment and furniture is equipment held pursuant to capital leases with costs of $14,901 and $14,809 and accumulated depreciation of $8,105 and $6,808 as of July 31, 2016 and January 31, 2016, respectively.

XML

Accrued Expenses

6 Months Ended

Jul. 31, 2016

Payables And Accruals [Abstract]

Accrued Expenses

5. Accrued Expenses

Accrued expenses consist of the following:

	July 31, 2016		January 31, 2016
Accrued payroll	$	2,357	$	1,828
Sales and value added taxes		1,444		4,075
Accrued commissions and bonuses		1,272		3,900
Accrued income taxes payable		652		541
Deferred rent, current portion		380		186
Legal and professional		553		805
Other		800		864
Total accrued expenses	$	7,458	$	12,199

XML

Deferred Rent

6 Months Ended

Jul. 31, 2016

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. For purposes of recognizing incentives and minimum rental expenses on a straight-line basis, the Company uses the date it obtains the legal right to use and control the leased space to begin amortization. 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:

	July 31, 2016			January 31, 2016
Leasehold improvement incentive	$	1,711		$	1,839
Non-cash rent expense		1,196			837
Total deferred rent		2,907			2,676
Less current portion included in accrued expenses		(380	)		(186	)
Deferred rent, net of current portion	$	2,527		$	2,490

XML

Fair Value Measurements

6 Months Ended

Jul. 31, 2016

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 July 31, 2016 and January 31, 2016, 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 July 31, 2016:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	15,036	$	15,036	$	—	$	—

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of January 31, 2016:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	11,019	$	11,019	$	—	$	—

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

Acquired Intangible Assets

6 Months Ended

Jul. 31, 2016

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 July 31, 2016: 

	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,636	)	$	1,869
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,674	)	$	1,869

The following table reflects the carrying value of intangible assets as of January 31, 2016:

	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,461	)	$	2,044
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,499	)	$	2,044

For the three and six months ended July 31, 2016, amortization expense of intangible assets was $88 and $175, respectively. For the three and six months ended July 31, 2015, amortization expense of intangible assets was $87 and $175, respectively.

XML

Commitments and Contingencies

6 Months Ended

Jul. 31, 2016

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.

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 July 31, 2016 and January 31, 2016, the Company has not recorded any liabilities for these indemnities.

Operating Leases

Effective July 1, 2016, the Company entered into an agreement to lease space and high performance computing capacity at a data center located in Virginia. The three-year agreement will provide access to up to 300 KW hours of computing capacity, which the Company believes will be suitable and adequate to meet the growing demands of its customers.

As of July 31, 2016, after taking into consideration the above agreement, total future minimum lease payments under non-cancelable lease arrangements are as follows:

Year ended January 31,
2017 (Remainder as of July 31, 2016)	$	2,557
2018		5,865
2019		5,479
2020		3,889
2021		2,033
Thereafter		4,806
	$	24,629

XML

Stock-Based Compensation

6 Months Ended

Jul. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

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

	Six Months Ended July 31,
	2016		2015
Expected life (years)		6.25		6.25
Risk-free interest rate		1.7%		2.0%
Expected volatility		35.1%		38.1%
Expected dividend yield		0.0%		0.0%

The weighted-average grant date fair value per share for service-based stock options granted in the three and six months ended July 31, 2016 was $4.66 and $4.29, respectively. The weighted-average grant date fair value per share for service-based stock options granted in the three and six months ended July 31, 2015 was $4.53 and $4.44, respectively.

For standard service-based stock options and restricted stock units, 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 is 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 2017 based on achieved performance metrics. As of July 31, 2016, the Company has concluded that it is not probable that the required metrics for vesting of the remaining unvested options will be achieved. As such, the Company has not recognized any additional share-based compensation expense associated with the unvested portion of these performance-based options.

During the first quarter of fiscal year 2017, the Company granted performance-based restricted stock units (“PSUs”). PSUs are recognized as expense when it becomes probable that performance measures triggering vesting will be achieved. As of July 31, 2016, the Company has concluded that it is not probable that any of the required metrics for vesting of the PSUs will be achieved. As a result, the Company has not recognized any share-based compensation expense associated with these awards.

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2016		2015		2016		2015
Cost of revenues	$	39	$	53	$	83	$	122
Sales and marketing		58		85		148		200
Research and development		162		185		345		426
General and administrative		178		168		350		357
Total	$	437	$	491	$	926	$	1,105

The total unrecognized compensation cost related to outstanding stock options and service-based restricted stock units is $2,537 at July 31, 2016. This amount is expected to be recognized over a weighted-average period of 1.69 years.

XML

Income Taxes

6 Months Ended

Jul. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

For the three and six months ended July 31, 2016, the Company’s income tax provision was $239 and $359, respectively. For the three and six months ended July 31, 2015, the income tax provision was $154 and $128, respectively. The provision for all 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, 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 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 July 31, 2016, 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 further 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

Geographic Information

6 Months Ended

Jul. 31, 2016

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 July 31,				Six Months Ended July 31,
	2016		2015		2016		2015
United States	$	4,414	$	4,298	$	8,721	$	8,141
Germany		2,743		2,461		5,292		4,650
Japan		2,896		2,138		6,322		4,479
France		2,025		1,841		3,912		3,620
Korea		1,455		1,412		2,792		2,705
United Kingdom		1,738		1,842		3,382		3,703
Sweden		429		482		847		957
Other		1,412		981		2,629		1,968
	$	17,112	$	15,455	$	33,897	$	30,223

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:

	July 31,		January 31,
	2016		2016
United States	$	10,210	$	11,346
France		303		388
Germany		118		110
Japan		114		116
Other		87		72
	$	10,832	$	12,032

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2016

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 July 31, 2016 and for the three and six months ended July 31, 2016 and 2015 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, 2016 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, 2016 filed with the Securities and Exchange Commission on March 21, 2016.

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 Accounting Standards Update (“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, 2018, and interim periods therein. 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 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.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This standard requires the recognition of lease assets and liabilities for all leases, with certain exceptions, on the balance sheet. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This ASU is effective for annual periods beginning after December 15, 2018, and for interim periods therein. The Company is currently evaluating the requirements of this ASU and has not yet determined its impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718)—Improvements to Employee Share-Based Payment Accounting. This standard simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The provisions of this ASU are effective for annual periods beginning after December 15, 2016, and for interim periods therein. Early adoption is permitted. The Company is currently evaluating the requirements of this ASU and has not yet determined its impact on the Company’s consolidated financial statements.

XML

Computation of Net Loss Per Share (Tables)

6 Months Ended

Jul. 31, 2016

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 per share:

	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Numerator:
Net loss	$	(678	)	$	(1,195	)	$	(1,621	)	$	(3,083	)
Denominator:
Weighted average common shares, basic and diluted		14,784,795			14,535,539			14,711,429			14,420,562
Basic and diluted net loss per share	$	(0.05	)	$	(0.08	)	$	(0.11	)	$	(0.21	)

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

The table below represents outstanding options, restricted stock unit awards and warrants that were excluded from the computation of diluted net loss 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 as of July 31, 2016 and 2015 due to the net loss position of the Company.

	As of July 31,
	2016		2015
Options, restricted stock unit awards and warrants to    purchase common and preferred stock		1,985,605		2,471,058

XML

Property and Equipment, net (Tables)

6 Months Ended

Jul. 31, 2016

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment, net consists of the following:

	July 31, 2016			January 31, 2016
Computer software and equipment	$	18,316		$	17,964
Office equipment and furniture		1,556			1,349
Leasehold improvements		1,632			1,562
Construction-in-process		270			169
Total property and equipment		21,774			21,044
Less accumulated depreciation		(10,942	)		(9,012	)
Property and equipment, net	$	10,832		$	12,032

XML

Accrued Expenses (Tables)

6 Months Ended

Jul. 31, 2016

Payables And Accruals [Abstract]

Accrued Expenses

Accrued expenses consist of the following:

	July 31, 2016		January 31, 2016
Accrued payroll	$	2,357	$	1,828
Sales and value added taxes		1,444		4,075
Accrued commissions and bonuses		1,272		3,900
Accrued income taxes payable		652		541
Deferred rent, current portion		380		186
Legal and professional		553		805
Other		800		864
Total accrued expenses	$	7,458	$	12,199

XML

Deferred Rent (Tables)

6 Months Ended

Jul. 31, 2016

Text Block [Abstract]

Deferred Rent

Deferred rent consists of the following:

	July 31, 2016			January 31, 2016
Leasehold improvement incentive	$	1,711		$	1,839
Non-cash rent expense		1,196			837
Total deferred rent		2,907			2,676
Less current portion included in accrued expenses		(380	)		(186	)
Deferred rent, net of current portion	$	2,527		$	2,490

XML

Fair Value Measurements (Tables)

6 Months Ended

Jul. 31, 2016

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 July 31, 2016:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	15,036	$	15,036	$	—	$	—

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value as of January 31, 2016:

	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	11,019	$	11,019	$	—	$	—

XML

Acquired Intangible Assets (Tables)

6 Months Ended

Jul. 31, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Carrying Value of Intangible Assets

The following table reflects the carrying value of intangible assets as of July 31, 2016: 

	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,636	)	$	1,869
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,674	)	$	1,869

The following table reflects the carrying value of intangible assets as of January 31, 2016:

	Cost		Accumulated Amortization			Net Book Value
Intellectual property	$	3,505	$	(1,461	)	$	2,044
Access to facilities contract		38		(38	)		—
Total	$	3,543	$	(1,499	)	$	2,044

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jul. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Future Minimum Lease Payments Under Non-Cancelable Lease Arrangements

As of July 31, 2016, after taking into consideration the above agreement, total future minimum lease payments under non-cancelable lease arrangements are as follows:

Year ended January 31,
2017 (Remainder as of July 31, 2016)	$	2,557
2018		5,865
2019		5,479
2020		3,889
2021		2,033
Thereafter		4,806
	$	24,629

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jul. 31, 2016

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 July 31,				Six Months Ended July 31,
	2016		2015		2016		2015
Cost of revenues	$	39	$	53	$	83	$	122
Sales and marketing		58		85		148		200
Research and development		162		185		345		426
General and administrative		178		168		350		357
Total	$	437	$	491	$	926	$	1,105

Service Based Stock Options [Member]

Assumptions Used to Calculate Fair Value of Common Stock Options for Employees and Executive Team Members

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

	Six Months Ended July 31,
	2016		2015
Expected life (years)		6.25		6.25
Risk-free interest rate		1.7%		2.0%
Expected volatility		35.1%		38.1%
Expected dividend yield		0.0%		0.0%

XML

Geographic Information (Tables)

6 Months Ended

Jul. 31, 2016

Segment Reporting [Abstract]

Revenues by Geographic Area

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

	Three Months Ended July 31,				Six Months Ended July 31,
	2016		2015		2016		2015
United States	$	4,414	$	4,298	$	8,721	$	8,141
Germany		2,743		2,461		5,292		4,650
Japan		2,896		2,138		6,322		4,479
France		2,025		1,841		3,912		3,620
Korea		1,455		1,412		2,792		2,705
United Kingdom		1,738		1,842		3,382		3,703
Sweden		429		482		847		957
Other		1,412		981		2,629		1,968
	$	17,112	$	15,455	$	33,897	$	30,223

Net Long-Lived Assets by Principal Geographic Area

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

	July 31,		January 31,
	2016		2016
United States	$	10,210	$	11,346
France		303		388
Germany		118		110
Japan		114		116
Other		87		72
	$	10,832	$	12,032

XML

Stock-Based Compensation - Assumptions Used to Calculate Fair Value of Common Stock Options for Employees and Executive Team Members (Detail) - Service Based Stock Options [Member]	6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (years)	6 years 3 months	6 years 3 months
Risk-free interest rate	1.70%	2.00%
Expected volatility	35.10%	38.10%
Expected dividend yield	0.00%	0.00%

XML

Stock-Based Compensation - Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Stock Based Compensation [Line Items]
Stock-based compensation expense	$ 437	$ 491	$ 926	$ 1,105
Cost of Revenues [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	39	53	83	122
Sales and Marketing [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	58	85	148	200
Research and Development [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	162	185	345	426
General and Administrative [Member]
Stock Based Compensation [Line Items]
Stock-based compensation expense	$ 178	$ 168	$ 350	$ 357

XML

Computation of Net Loss Per Share - Calculation of Basic and Diluted Net Loss Per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Numerator:
Net loss	$ (678)	$ (1,195)	$ (1,621)	$ (3,083)
Denominator:
Weighted average common shares, basic and diluted	14,784,795	14,535,539	14,711,429	14,420,562
Basic and diluted net loss per share	$ (0.05)	$ (0.08)	$ (0.11)	$ (0.21)

XML

Computation of Net Loss Per Share - Outstanding Options, Restricted Stock Unit Awards and Warrants Excluded from Computation of Diluted Net Loss Per Share (Detail) - shares	6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Earnings Per Share [Abstract]
Options, restricted stock unit awards and warrants to purchase common and preferred stock	1,985,605	2,471,058

XML

Property and Equipment, Net - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 21,774	$ 21,044
Less accumulated depreciation	(10,942)	(9,012)
Property and equipment, net	10,832	12,032
Computer Software and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	18,316	17,964
Office Equipment and Furniture [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	1,556	1,349
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	1,632	1,562
Construction in Process [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	$ 270	$ 169

XML

Property and Equipment, Net - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015	Jan. 31, 2016
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense	$ 892	$ 690	$ 1,816	$ 1,353
Cost of equipment held pursuant to capital leases	14,901		14,901		$ 14,809
Accumulated amortization	10,942		10,942		9,012
Assets Held under Capital Leases [Member]
Property, Plant and Equipment [Line Items]
Accumulated amortization	$ 8,105		$ 8,105		$ 6,808

XML

Accrued Expenses - Accrued Expenses (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Payables And Accruals [Abstract]
Accrued payroll	$ 2,357	$ 1,828
Sales and value added taxes	1,444	4,075
Accrued commissions and bonuses	1,272	3,900
Accrued income taxes payable	652	541
Deferred rent, current portion	380	186
Legal and professional	553	805
Other	800	864
Total accrued expenses	$ 7,458	$ 12,199

XML

Deferred Rent - Deferred Rent (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Deferred Revenue Disclosure [Abstract]
Leasehold improvement incentive	$ 1,711	$ 1,839
Non-cash rent expense	1,196	837
Total deferred rent	2,907	2,676
Less current portion included in accrued expenses	(380)	(186)
Deferred rent, net of current portion	$ 2,527	$ 2,490

XML

Fair Value Measurements - Fair Value Hierarchy for Financial Assets and Liabilities Measured at Fair Value (Detail) - Money Market Funds [Member] - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Assets:
Money market funds	$ 15,036	$ 11,019
Level 1 [Member]
Assets:
Money market funds	$ 15,036	$ 11,019

XML

Acquired Intangible Assets - Carrying Value of Intangible Assets (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Cost	$ 3,543	$ 3,543
Accumulated Amortization	(1,674)	(1,499)
Net Book Value	1,869	2,044
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	3,505	3,505
Accumulated Amortization	(1,636)	(1,461)
Net Book Value	1,869	2,044
Access to Facilities Contract [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	38	38
Accumulated Amortization	$ (38)	$ (38)

XML

Acquired Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Intangible assets amortization expense	$ 88	$ 87	$ 175	$ 175

XML

Commitments and Contingencies - Additional Information (Detail)	6 Months Ended
	Jul. 31, 2016 USD ($) kWh	Jan. 31, 2016 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Recorded liabilities for guarantees and indemnities | $	$ 0	$ 0
Operating leases arrangement term	3 years
Computing capacity | kWh	300

XML

Commitments and Contingencies - Future Minimum Lease Payments Under Operating Lease Commitments (Detail) $ in Thousands	Jul. 31, 2016 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2017 (Remainder as of July 31, 2016)	$ 2,557
2018	5,865
2019	5,479
2020	3,889
2021	2,033
Thereafter	4,806
Total	$ 24,629

XML

Stock-Based Compensation - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Weighted average grant date per share for stock options	$ 4.66	$ 4.53	$ 4.29	$ 4.44
Total unrecognized compensation cost	$ 2,537		$ 2,537
Weighted-average period			1 year 8 months 9 days

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Income Tax Disclosure [Abstract]
Provision (benefit) for income taxes	$ 239	$ 154	$ 359	$ 128
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

XML

Geographic Information - Revenues by Geographic Area (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 17,112	$ 15,455	$ 33,897	$ 30,223
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	4,414	4,298	8,721	8,141
Germany [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	2,743	2,461	5,292	4,650
Japan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	2,896	2,138	6,322	4,479
France [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	2,025	1,841	3,912	3,620
Korea [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,455	1,412	2,792	2,705
United Kingdom [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,738	1,842	3,382	3,703
Sweden [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	429	482	847	957
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 1,412	$ 981	$ 2,629	$ 1,968

XML

Geographic Information - Net Long-Lived Assets by Principal Geographic Area (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	$ 10,832	$ 12,032
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	10,210	11,346
France [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	303	388
Germany [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	118	110
Japan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	114	116
Other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property and equipment, net	$ 87	$ 72