Note 7. Common Stock and Stockholders’ Equity

Common Stock

Each share of common stock has the right to one vote. The holders of the common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors of the Company (the “Board of Directors”), subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid since inception.

Preferred Stock

As of July 31, 2017, the Company had authorized 25,000,000 shares of preferred stock, par value $0.0001, of which no shares were issued and outstanding.

2016 Equity Incentive Plan

The 2016 Equity Incentive Plan (the “2016 Plan”) was approved by the Company’s stockholders in September 2016. The 2016 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights and performance cash awards. Awards could be granted under the 2016 Plan beginning on the effective date of the registration statement, October 5, 2016. The 2016 Plan replaced the Company’s 2006 Stock Plan; however, awards outstanding under the 2006 Stock Plan will continue to be governed by their existing terms.

The Company has reserved 5,255,046 shares of its common stock for issuance under the 2016 Plan. The number of shares reserved for issuance under the 2016 Plan will automatically increase on the first day of each fiscal year during the term of the 2016 Plan by a number of shares equal to 5% of its outstanding shares of common stock on the last day of the prior fiscal year. The number and class of shares reserved under the Company’s 2016 Plan will be adjusted in the event of a stock split, stock dividend or other changes in its capitalization.

The following table summarizes stock option activity under the Company’s 2006 Stock Plan and the 2016 Plan during the six months ended July 31, 2017 (aggregate intrinsic value in thousands):

	Options Outstanding
	Outstanding Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Balance at January 31, 2017		13,016,402		$	5.60		7.92	$	265,542
Option grants		406,686		$	23.84
Options exercised		(1,830,867	)	$	3.49
Options forfeited		(462,606	)	$	6.92
Balance at July 31, 2017		11,129,615		$	6.56		7.65	$	268,956
Exercisable at July 31, 2017		6,153,537		$	4.36		7.01	$	162,270

The options exercisable as of July 31, 2017 include options that are exercisable prior to vesting. The aggregate intrinsic value of options vested and expected to vest and exercisable as of July 31, 2017 is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of July 31, 2017. The aggregate intrinsic value of exercised options was $16.8 million and $575,000 for the three months ended July 31, 2017 and 2016, respectively, and $44.5 million and $2.2 million for the six months ended July 31, 2017 and 2016, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

The weighted-average grant date fair value of options granted was not applicable for the three months ended July 31, 2017 as no options were granted during this period and $3.92 per share for the three months ended July 31, 2016. The weighted-average grant date fair value of options granted was $11.04 and $3.72 per share for the six months ended July 31, 2017 and 2016, respectively.

During each of the three months ended July 31, 2017 and 2016, zero options were granted to non-employees. During the six months ended July 31, 2017 and 2016, zero and 52,250 options were granted to non-employees, respectively.

Early Exercises of Stock Options

Certain option grants under the 2006 Stock Plan are allowed to be exercised prior to vesting. The unvested shares of common stock exercised are subject to the Company’s right to repurchase at the lower of the original exercise price or the fair market value of the share at the time the repurchase right is exercised. Early exercises of options are not deemed to be substantive exercises for accounting purposes and accordingly, amounts received for early exercises are initially recorded in accrued expenses and other current liabilities and reclassified to additional paid-in capital as the underlying shares vest. At July 31, 2017, the Company had $2.3 million recorded in accrued expenses and other current liabilities related to early exercises of stock options, and the related number of unvested shares subject to repurchase was 217,181.

Restricted Stock Units (“RSUs”)

The following table summarizes the activity related to the Company’s RSUs:

	Number of RSUs Outstanding			Weighted-Average Grant Date Fair Value
Awarded and unvested at January 31, 2017		77,883		$	18.38
Awards granted		1,924,386		$	25.34
Awards vested		(88,646	)	$	22.71
Awards forfeited		(57,777	)	$	17.50
Awarded and unvested at July 31, 2017		1,855,846		$	25.41

2016 Employee Stock Purchase Plan

The Board of Directors adopted the 2016 Employee Stock Purchase Plan (the “ESPP”) in September 2016 and it has been approved by our stockholders. The ESPP allows eligible employees to purchase shares of common stock through payroll deductions and is intended to qualify under Section 423 of the Internal Revenue Code.

The Company has reserved 1,123,484 shares of its common stock for issuance under the ESPP. The number of shares reserved for issuance under the ESPP will automatically increase on the first day of each fiscal year during the term of the ESPP by a number of shares equal to the least of (i) 1% of its outstanding shares of common stock on the last day of the prior fiscal year, (ii) 1,250,000 shares or (iii) a lesser number of shares determined by the Board of Directors. The number and class of shares reserved under the ESPP will be adjusted in the event of a stock split, stock dividend or other changes in its capitalization.

Each offering period will last a number of months determined by the administrator, up to a maximum of 27 months. The initial offering period began on the effective date of the Company’s initial public offering, October 5, 2016, and ends on September 15, 2018, and new 24 month offering periods will begin on each March 16 and September 16 thereafter. Currently each offering period consists of four consecutive purchase periods, of approximately six months duration, at the end of which payroll contributions are used to purchase shares of the Company’s common stock. Participants may purchase the Company’s common stock through payroll deductions, up to a maximum of 15% of their eligible compensation. Participants may withdraw from the ESPP and receive a refund of their accumulated payroll contributions at any time prior to a purchase date. Unless changed by the administrator, the purchase price for each share of common stock purchased under the ESPP will be the lower of (i) 85% of the fair market value per share on the first day of the applicable offering period (or, in the case of the initial offering period, the price at which one share of common stock is offered to the public in its initial public offering) or (ii) 85% of the fair market value per share on the applicable purchase date.

As of July 31, 2017, 197,781 shares of common stock were purchased under the ESPP. The Company selected the Black-Scholes option-pricing model as the method for determining the estimated fair value for the Company’s ESPP. As of July 31, 2017, total unrecognized compensation cost related to the ESPP was $6.6 million which will be amortized over a weighted-average period of 1.16 years.

Market-based Options

In September 2016, the Board of Directors granted 544,127 stock options to the Chief Executive Officer (the “2016 CEO Grant”) under the 2006 Equity Plan with an exercise price of $13.04 per share. The 2016 CEO Grant is eligible to vest based on the achievement of stock price appreciation targets after the consummation of the initial public offering, as well as continuous service over a four-year period following the grant date. The fair value of the 2016 CEO Grant was determined using a Monte Carlo simulation approach. The Company amortizes the fair value of the option award using the graded-vesting method. For the three months ended July 31, 2017, the total stock-based compensation expense recognized was approximately $471,000. As of July 31, 2017, two of the three performance-based milestones were achieved, resulting in 79,350 shares being vested and exercisable.

Stock-based Compensation

The Company’s total stock-based compensation expense as of the dates indicated was as follows (in thousands):

	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2017		2016		2017		2016
Cost of revenue:
Subscription services	$	529	$	140	$	884	$	265
Professional services and other		716		109		1,280		244
Research and development		1,647		303		2,799		625
Sales and marketing		2,340		441		3,940		911
General and administrative		2,406		566		4,013		1,220
Total	$	7,638	$	1,559	$	12,916	$	3,265

Stock-based compensation capitalized in capitalized software development costs was approximately $263,000 at July 31, 2017.

Of the total stock-based compensation expense, costs recognized for options granted to non-employees were immaterial for all periods presented.

As of July 31, 2017 there was approximately $24.7 million of total unrecognized compensation cost related to unvested stock options granted to employees and non-employee service providers under the 2006 Stock Plan and 2016 Equity Incentive Plan. This unrecognized compensation cost is expected to be recognized over an estimated weighted-average amortization period of approximately 2.37 years.

As of July 31, 2017 there was approximately $45.0 million of total unrecognized compensation cost related to unvested restricted stock units granted to employees under the 2016 Equity Incentive Plan. This unrecognized compensation cost is expected to be recognized over an estimated weighted-average amortization period of approximately 3.63 years.

No stock options were granted during the three months ended July 31, 2017.