Equity Incentive Plans

2008 and 2016 Stock Plan

In 2008 and 2016, the Company adopted the 2008 Stock Incentive Plan (as amended, the “2008 Plan”), and the 2016 Equity Incentive Plan (as amended, the “2016 Plan”), primarily for the purpose of granting stock-based awards to employees, directors and consultants, including stock options, restricted stock units (“RSUs”) and other stock-based awards. With the establishment of the 2016 Plan in December 2016, all shares available for grant under the 2008 Plan were transferred to the 2016 Plan. The Company no longer grants any stock-based awards under the 2008 Plan and any shares underlying stock options canceled under the 2008 Plan will be automatically transferred to the 2016 Plan. Stock options granted under the stock option plans may be either incentive stock options (“ISOs”) or nonstatutory stock options (“NSOs”). ISOs may be granted to employees and NSOs may be granted to employees, directors, or consultants. As of January 31, 2019, the Company had made one ISO grant, all other stock options outstanding were granted as NSOs. The exercise prices of the stock option grants must be not less than 100% of the fair value of the common stock on the grant date as determined by the Board of Directors. If, at the date of grant, the optionee owns more than 10% of the total combined voting power of all classes of outstanding stock (a “10% stockholder”), the exercise price must be at least 110% of the fair value of the common stock on the date of grant as determined by the Board of Directors. Options granted are exercisable over a maximum term of 10 years from the date of grant or five years from the date of grant for ISOs granted to any 10% stockholder. The Board of Directors or a committee thereof determines the vesting schedule for all equity awards. Stock option awards generally vest over a period of four years with 25% vesting on the one year anniversary of the award and the remainder vesting monthly over the next 36 months of the grantee’s service to the Company. RSU awards granted to new employees generally vest over a period of four years with 25% vesting on the one year anniversary of the award and the remainder vesting quarterly over the next 12 quarters, subject to the grantee’s continued service to the Company. RSUs granted to existing employees generally vest quarterly over a period of four years, subject to the grantee’s continued service to the Company.

Stock Options and Restricted Stock Units

The following table summarizes stock option and RSU award activity for the 2008 and 2016 Plans (in thousands, except share and per share data and years):



			Options Outstanding
	Shares Available for Grant		Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance - January 31, 2017	678,260		11,090,597		$	6.47	8.2	$	21,717
Authorized	6,979,900		—		—
Options granted	(3,642,275	)	3,642,275		10.80
Options exercised	—		(1,263,722	)	6.59
Early exercised shares repurchased	34,710		—		—
Options forfeited and expired	831,715		(831,715	)	7.73
RSUs granted	(245,746	)	—
Balance - January 31, 2018	4,636,564		12,637,435		7.63		7.7	$	246,227
Authorized	2,528,778		—		—
Options exercised	—		(3,144,202	)	7.06
Early exercised shares repurchased	35,668		—		—
Options forfeited and expired	872,223		(872,223	)	8.40
RSUs granted	(2,134,844	)	—
RSUs forfeited and canceled	128,687		—
Balance - January 31, 2019	6,067,076		8,621,010		7.75		6.7	729,392
Options vested and exercisable - January 31, 2018			5,540,858		6.33		6.6	115,122
Options vested and exercisable - January 31, 2019			5,342,183		$	6.95	6.0	$	456,275
Options vested and exercisable - Stock options vested and expected to vest -January 31, 2019			8,621,010		$	7.75	6.7	$	729,392

The weighted-average grant date fair value of options granted was $4.76 per share and $2.91 per share during the years ended January 31, 2018 and 2017, respectively. There were no options granted during the year ended January 31, 2019. The intrinsic value of options exercised for the years ended January 31, 2019, 2018 and 2017 was determined to be $198.9 million, $4.1 million and $2.9 million, respectively.

The total grant date fair value of options vested for the years ended January 31, 2019, 2018 and 2017, was $15.9 million, $13.5 million and $15.5 million, respectively. As of January 31, 2019, we had stock-based compensation expenses of $35.3 million, related to unvested stock options that the Company expects to recognize over a weighted-average period of 2.09 years.

The following table summarizes RSU activity for the the year ended January 31, 2019:



	Shares		Weighted-Average Grant Date Fair Value per RSU
Unvested - January 31, 2018	245,746		$	26.20
RSUs granted	2,134,844		54.53
RSUs vested	(263,129	)	42.38
RSUs forfeited and canceled	(128,687	)	42.08
Unvested - January 31, 2019	1,988,774		$	54.22

2016 China Stock Appreciation Rights Plan

In April 2016, the Company adopted the 2016 China Stock Appreciation Rights Plan (as amended, the “China SAR Plan”) for its employees in China. For grants made prior to the IPO, the China SAR Plan included a service vesting condition and a performance vesting condition. The service vesting condition is generally over four years with 25% vesting on the one year anniversary of the award and the remainder vesting monthly over the next 36 months of the grantee’s service to the Company. The performance vesting condition is defined as the Company’s common stock being publicly traded (a qualifying liquidity event). The China SAR Plan units are cash settled upon exercise and will be paid as a cash bonus equal to the difference between the strike price of the vested plan units and the fair market value of common stock at the end of each reporting period.

For the years ended January 31, 2019 and 2018, the Company granted 3,650 and 8,000 units of the China SAR Plan, respectively, at a weighted average strike price of $74.92 and $27.35 per share, respectively. During the year ended January 31, 2019, upon the vesting of 14,273 units, the total expense and liability related to China SAR was $1.1 million. During the year year ended January 31, 2018, upon the vesting of 9,302 units, the total expense and liability related to the China SAR was $0.2 million. These amounts were recorded as part of the “Accrued compensation and benefits” on the Company’s consolidated balance sheet. The Company did not recognize any compensation expense related to the China SAR Plan prior to October 18, 2017 because the Company had determined the performance conditions, with respect to the occurrence of a qualifying liquidity event, were not probable until the successful IPO.

2017 Employee Stock Purchase Plan

In October 2017, the Board of Directors adopted, and stockholders approved, the 2017 Employee Stock Purchase Plan (“ESPP”). A total of 995,000 shares of the Company’s Class A common stock were initially authorized for issuance under the ESPP, which subsequently increased to 1,500,755 on February 1, 2018 pursuant to the automatic annual increase feature in the ESPP. Subject to any plan limitations, the 2017 ESPP allows eligible employees to contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of the Company’s Class A common stock at a discounted price per share. Except for the initial offering period, the ESPP provides for separate six-month offering periods. The initial offering period ran from October 18, 2017 through June 15, 2018.

Unless otherwise determined by the Board of Directors, the Company’s Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per share that is the lesser of (1) 85% of the fair market value of the Company’s Class A common stock on the first trading day of the offering period, which for the initial offering period is the price at which shares of the Company’s Class A common stock were first sold to the public, or (2) 85% of the fair market value of the Company’s Class A common stock on the last trading day of the offering period.

During the year ended January 31, 2019, there were 374,576 shares of Class A common stock purchased under the ESPP. During the year ended January 31, 2018, no shares of Class A common stock were purchased under the ESPP. The total expense related to the ESPP for years ended January 31, 2019 and 2018 was $2.9 million and $0.7 million, respectively.

Stock Option Repricing

On April 13, 2016, the Company amended all then-current employee and active non-employee stock options with an exercise price greater than $6.50 per share that remained outstanding and unexercised on such date to reprice their respective exercise prices to $6.50 per share, the fair market value of the Company’s common stock as of April 13, 2016, as determined by the Board of Directors. Pursuant to this repricing, options to purchase 6,898,736 shares of common stock were repriced, including options to purchase 3,303,786 shares of common stock held by the Company’s executive officers. The Company determined the total incremental compensation expense related to the repriced awards was $10.7 million, of which $1.9 million and $2.4 million was recorded during the years ended January 31, 2019 and 2018, respectively.

Early Exercise of Stock Options

The Company allows employees and directors to exercise options granted prior to vesting. The unvested shares are subject to lapsing repurchase rights upon termination of employment. For early exercised stock options under the 2008 Plan, the repurchase price is at the original purchase price. For early exercised stock options under the 2016 Plan, the repurchase price is the lower of (i) the then-current fair market value of the common stock on the date of repurchase, and (ii) the original purchase price. The proceeds initially are recorded in other current and noncurrent liabilities from the early exercise of stock options and reclassified to common stock and paid-in capital as the repurchase right lapses.

For the years ended January 31, 2019 and 2018, the Company issued common stock of 6,059 and 363,894 shares, respectively, for stock options exercised prior to vesting. For the years ended January 31, 2019 and 2018, the Company repurchased 35,668 and 34,710 shares, respectively, of common stock related to unvested stock options at the original exercise price due to the termination of employees. As of January 31, 2019 and 2018, there were 59,356 and 256,640 shares, respectively, held by employees and directors that were subject to potential repurchase at an aggregate price of $0.5 million and $2 million, respectively.

Determination of Fair Value

The determination of the fair value of stock options on the date of grant using an option-pricing model is affected by the fair value of the Company’s common stock, as well as assumptions regarding a number of complex and subjective variables. The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options, which requires the use of assumptions including actual and projected employee stock option exercise behaviors, expected price volatility of the Company’s common stock, the risk-free interest rate and expected dividends. Each of these inputs is subjective and generally requires significant judgment to determine.

Fair Value of Common Stock. Prior to the IPO, the fair value of common stock underlying the stock options had historically been determined by the Board of Directors, with input from the Company’s management. The Board of Directors previously determined the fair value of the common stock at the time of grant of the options by considering a number of objective and subjective factors, including valuations of comparable companies, sales of redeemable convertible preferred stock, sales of common stock to unrelated third parties, operating and financial performance, the lack of liquidity of the Company’s capital stock, and general and industry-specific economic outlook. Subsequent to the IPO, the fair value of the underlying common stock is determined by the closing price, on the date of grant, of the Company’s Class A common stock, which is traded publicly on The Nasdaq Global Market.

Expected Term. The expected term represents the period that stock-based awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. For other option grants, the Company estimates the expected term using historical data on employee exercises and post-vesting employment termination behavior taking into account the contractual life of the award.

Expected Volatility. Since the Company has limited trading history of its common stock, the expected volatility is derived from the average historical stock volatilities of several unrelated public companies within the Company’s industry that the Company considers to be comparable to its own business over a period equivalent to the expected term of the stock option grants.

Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.

Dividend Rate. The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans to do so.

The fair value of stock options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



	Years Ended January 31,
	2019	2018	2017
Expected term (in years)	*	5.85 - 6.20	5.77-6.99
Expected volatility	*	41.2% - 45.7%	41.4%-43.7%
Risk-free interest rate	*	1.8% - 2.4%	1.2% - 2.0%
Dividend yield	*	0%	0%

* No stock options were granted during the year ended January 31, 2019.

The fair value of the purchase rights granted under the 2017 ESPP was estimated on the first day of the offering period using the Black-Scholes option-pricing model with the following assumptions:



	Years Ended January 31,
	2019	2018
Expected term (in years)	0.49 - 0.54	0.67 - 0.7
Expected volatility	29% - 54%	23% - 24%
Risk-free interest rate	2.1% - 2.5%	1.2%
Dividend yield	0%	0%

Stock-Based Compensation Expense

Total stock-based compensation expense recognized in the Company’s consolidated statements of operations is as follows (in thousands):



	Years Ended January 31,
	2019		2018		2017
Cost of revenue—subscription	$	2,047	$	730	$	570
Cost of revenue—services	1,239		462		482
Sales and marketing	11,059		6,364		5,514
Research and development	11,687		5,752		5,755
General and administrative	11,371		7,927		8,683
Total stock-based compensation expense	$	37,403	$	21,235	$	21,004