11. Employee Benefits and Stock-based Compensation

401(k) Plan

The Company maintains a defined contribution 401(k) plan (the “401(k) Plan”) for all of its eligible U.S. employees. Under the 401(k) Plan, eligible employees may contribute up to the Internal Revenue Service annual contribution limitation. The Company is responsible for administrative costs of the Plan. The Company has not had any matching contributions to date.

Stock Option Plans

2004 Stock Plan. The 2004 Stock Plan provides for the grant of incentive stock options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), nonstatutory stock options (“NSOs”), stock purchase rights to acquire restricted stock and restricted stock units. Upon the completion of the IPO, no additional awards will be granted under the 2004 Plan and the 2004 Plan was terminated. However, all outstanding stock options and other awards previously granted under the 2004 Plan will remain subject to the terms of the 2004 Plan.

2012 Equity Incentive Plan. The 2012 Equity Incentive Plan, or EIP, permits the grant of ISOs, within the meaning of Section 422 of the Code, to employees of the Company and any of the Company’s subsidiary corporations, and the grant of NSOs, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, deferred stock units and dividend equivalents to employees, directors and consultants of the Company and any of the Company’s subsidiary corporations’ employees and consultants.

The exercise price of ISOs granted to a holder of more than 10% of the voting power of all classes of the Company’s shares shall be no less than 110% of fair market value on the grant date. The exercise price of ISOs granted to other employees and NSOs shall be no less than 100% of fair market value on the grant date. Options granted under the Plan have a term of up to 10 years from grant date. Options granted to new employees generally vest 25% on the first anniversary service date of the grant and remainder vest ratably over the following 36 months.

Restricted stock and restricted stock units granted to new employees generally vest as to 1/4th of the shares on the first anniversary service date of the grant and 1/16th of the shares vest every 3 months thereafter, so as to be 100% vested on the fourth anniversary of the vesting commencement date.

Vesting schedules for other service or performance condition awards vary and are subject to approval by the board of directors; provided that the performance awards shall not vest at all until the performance conditions are achieved and are subject to the award’s holders continuing to provide services to the Company through such vesting dates. The performance condition awards are automatically forfeited in their entirety, without any cost to or action by the Company, if there has been no achievement of the performance. The holders of restricted stock have voting power and other rights with respect to such shares, provided, however, that such shares are held in escrow and subject to forfeiture until the shares vested.

On February 1, 2016 and 2015, the Company added 1,455,001 and 1,387,689 ordinary shares, respectively, to the ordinary shares reserved for issuance, pursuant to an “evergreen” provision contained in the EIP. Pursuant to such provision, on February 1st of each fiscal year, the number of ordinary shares reserved for issuance under the EIP is automatically increased by a number equal to the lesser of (i) 3,500,000 ordinary shares, (ii) four and one half percent (4.5%) of the aggregate number of ordinary shares outstanding on January 31st of the preceding fiscal year, or (iii) a lesser number of shares that may be determined by the Company’s Board of Directors.

Amended and Restated 2012 Employee Stock Purchase Plan. The Amended and Restated 2012 Employee Stock Purchase Plan, or ESPP, permits eligible participants to purchase ordinary shares at a discount through contributions up to 15% of their eligible compensation, subject to any IRS limitations. The ESPP provides each offering and purchasing period of six months in duration. The purchase price is 85% of the lower of the closing price of the Company’s ordinary shares on the first trading day of each offering period or on the purchase date.

On February 1, 2016 and 2015, the Company added 404,166 and 385,469 ordinary shares, respectively, to the ordinary shares reserved for issuance, pursuant to an “evergreen” provision contained in the ESPP. Pursuant to such provision, on February 1st of each fiscal year, the number of ordinary shares reserved for issuance under the ESPP is automatically increased by a number equal to the lesser of (i) 1,500,000 ordinary shares, (ii) one and one quarter percent (1.25%) of the aggregate number of ordinary shares outstanding on such date, or (iii) an amount determined by the Company’s Board of Directors or a duly authorized committee of the Board of Directors.

Stock-based Compensation

The following table presents the classification of stock-based compensation for the periods indicated:

	Year Ended January 31,
	2017		2016		2015
	(in thousands)
Stock-based compensation:
Cost of revenue	$	1,078	$	657	$	343
Research and development		29,729		19,082		8,654
Selling, general and administrative		18,025		11,355		6,695
Total stock-based compensation	$	48,832	$	31,094	$	15,692

As of January 31, 2017, total unrecognized compensation cost related to unvested stock options was $8.1 million and is expected to be recognized over a weighted-average period of 1.94 years. Total unrecognized compensation cost related to unvested restricted stock units was $104.1 million and is expected to be recognized over a weighted-average period of 2.80 years. Total unrecognized compensation cost related to unvested restricted stock awards was $6.9 million and is expected to be recognized over a weighted-average period of 1.73 years.

The following table sets forth the weighted-average assumptions used to estimate the fair value of the stock options and employee stock purchase plan awards for the periods indicated:

	Year Ended January 31,
	2017			2016			2015
Stock Options:
Volatility		38	%		57	%		64	%
Risk-free interest rate		1.59	%		1.74	%		1.93	%
Expected term (years)		6.00		6.08			6.01
Dividend yield		0	%		0	%		0	%
Employee stock purchase plan awards:
Volatility		54	%		63	%		49	%
Risk-free interest rate		0.51	%		0.21	%		0.07	%
Expected term (years)		0.5			0.5			0.5
Dividend yield		0	%		0	%		0	%

The Company calculates expected volatility based on the historical volatilities of similar companies whose share prices are publicly available for a period commensurate with the expected term. Accordingly, the combination of the similar companies and associated stock price changes will significantly impact the volatility used in the estimate of fair value of the Company’s stock option.

The following table summarizes stock option activities for the periods indicated:

	Option Outstanding
										Weighted-
								Total Intrinsic		Average
						Weighted-		Value of		Remaining		Aggregate
				Weighted-		Average		options		Contractual		Intrinsic
				Average		Grant-date		Exercised		Term		Value
	Shares			Exercise Price		Fair Value		(in thousands)		(in years)		(in thousands)
Outstanding at January 31, 2014		3,358,706		$	6.92
Granted		428,781			36.33	$	21.37
Exercised		(1,456,944	)		5.84			$	46,427
Forfeited		(48,634	)		13.38
Outstanding at January 31, 2015		2,281,909			13.00
Granted		179,700			71.36	$	38.81
Exercised		(567,888	)		9.11			$	37,603
Forfeited		(40,331	)		35.65
Outstanding at January 31, 2016		1,853,390			19.36
Granted		110,500			47.82	$	18.76
Exercised		(235,923	)		13.69			$	10,788
Forfeited		(16,708	)		55.07
Expired		(7,735	)		14.19
Outstanding at January 31, 2017		1,703,524		$	21.66					5.16		$	51,670
Exercisable at January 31, 2017		1,367,960		$	14.94						4.42	$	49,016

The intrinsic value of options outstanding and exercisable options are calculated based on the difference between the fair market value of the Company’s ordinary shares on the reporting date and the exercise price. The closing price of the Company’s ordinary shares was $49.61 on January 31, 2017, as reported by The NASDAQ Global Market. The intrinsic value of exercised options is calculated based on the difference between the fair market value of the Company’s ordinary shares on the exercise date and the exercise price.

The following table summarizes restricted stock and restricted stock units activities for the periods indicated:

				Weighted-
				Average
				Grant-Date
	Shares			Fair Value
Unvested at January 31, 2014		1,410,089		$	14.02
Granted		1,111,204			38.60
Vested		(484,296	)		17.39
Forfeited		(56,549	)		19.93
Unvested at January 31, 2015		1,980,448			26.82
Granted		1,314,387			66.14
Vested		(769,779	)		27.82
Forfeited		(29,568	)		42.11
Unvested at January 31, 2016		2,495,488			47.04
Granted		676,598			67.68
Vested		(955,230	)		39.28
Forfeited		(41,183	)		52.49
Unvested at January 31, 2017		2,175,673		$	56.76

Total fair value as of the respective vesting dates of restricted stock and restricted stock units vested for the fiscal years ended January 31, 2017, 2016 and 2015 was approximately $51.1 million, $59.2 million, and $17.3 million, respectively. As of January 31, 2017, the aggregate intrinsic value of unvested restricted stock and restricted stock units was $107.9 million.