Equity Incentive Plans

3 Months Ended

May 03, 2020

Share-based Payment Arrangement [Abstract]

We maintain two equity incentive plans: the 2009 Equity Incentive Plan (the 2009 Plan) and the 2015 Equity Incentive Plan (the 2015 Plan). The 2015 Plan became effective in connection with our initial public offering (IPO) in October 2015 and serves as the successor to our 2009 Plan. The 2015 Plan provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock unit awards (RSUs), performance stock awards, performance cash awards, and other forms of stock awards to our employees, directors and consultants. No new awards have been issued under our 2009 Plan after the effective date of our 2015 Plan. Outstanding awards granted under our 2009 Plan will remain subject to the terms of our 2009 Plan and applicable award agreements, until such outstanding awards that are stock options are exercised, terminated or expired by their terms.

We net-share settle equity awards held by certain employees by withholding shares upon vesting to satisfy tax withholding obligations. The shares withheld to satisfy employee tax withholding obligations are returned to our 2015 Plan and will be available for future issuance. Payments for employees’ tax obligations to the tax authorities are recognized as a reduction to additional paid-in capital and reflected as a financing activity in our condensed consolidated statements of cash flows.

The exercise price of stock options will generally not be less than 100% of the fair market value of our common stock on the date of grant, as determined by our board of directors. Our equity awards generally vest over a two to four year period and expire no later than ten years from the date of grant.

2015 Amended and Restated Employee Stock Purchase Plan

Our 2015 Employee Stock Purchase Plan (2015 ESPP) became effective in connection with our IPO and was amended and restated in fiscal 2020. Our board of directors (or a committee thereof) has the authority under the 2015 ESPP to establish the length and terms of the offering periods and purchase periods and the purchase price of the shares of common stock which may be purchased under the plan. The current offering terms allow eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 30% of their eligible compensation, subject to a cap of 3,000 shares on any purchase date or $25,000 in any calendar year (as determined under applicable tax rules). In February 2019, we amended the offering terms under the 2015 ESPP on a prospective basis, to include an additional dollar cap of $7,500 per purchase period. The current terms also allow for a 24-month offering period beginning March 16th and September 16th of each year, with each offering period consisting of four 6 months purchase periods, subject to a reset provision. Further, currently, on each purchase date, eligible employees may purchase our common stock at a price per share equal to 85% of the lesser of the fair market value of our common stock (1) on the first trading day of the applicable offering period or (2) the purchase date.

Under the reset provision currently authorized, if the closing stock price on the offering date of a new offering falls below the closing stock price on the offering date of an ongoing offering, the ongoing offering would terminate immediately following the purchase of ESPP shares on the purchase date immediately preceding the new offering and participants in the terminated ongoing offering would automatically be enrolled in the new offering (ESPP reset), resulting in a modification charge to be recognized over the new offering period. During the first quarter of fiscal 2021, there was an ESPP reset that resulted in a modification charge of $23.8 million, which is being recognized over the new offering period ending March 15, 2022.

Stock-based compensation expense related to our 2015 ESPP was $11.4 million and $5.6 million during the first quarter of fiscal 2020 and 2021. At the end of the first quarter of fiscal 2021, total unrecognized stock-based compensation cost related to our 2015 ESPP was $49.8 million, which is expected to be recognized over a weighted-average period of 1.9 years.

Stock Options

A summary of the stock option activity under our equity incentive plans and related information is as follows:


	Options Outstanding
	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value (in thousands)
Balance at the end of fiscal 2020	26,822,243	$	8.97	3.9	$	237,803

Options exercised	(2,174,568)	4.32
Options forfeited/canceled	(108,184)	16.13
Balance at the end of the first quarter of fiscal 2021	24,539,491	$	9.36	3.8	$	127,583
Vested and exercisable at the end of the first quarter of fiscal 2021	22,050,411	$	8.62	4.2	$	126,788

The aggregate intrinsic value of options vested and exercisable at the end of the first quarter of fiscal 2021 is calculated based on the difference between the exercise price and the closing price of $13.37 of our common stock on the last day of the first quarter of fiscal 2021.

During the first quarter of fiscal 2020 and 2021, we recognized $5.5 million and $2.0 million in stock-based compensation expense related to stock options.

At the end of the first quarter of fiscal 2021, total unrecognized employee compensation cost related to outstanding options was $8.5 million, which is expected to be recognized over a weighted-average period of 1.2 years.

RSUs

A summary of the RSU activity under our 2015 Plan and related information is as follows:


	Number of RSUs Outstanding	Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)
Unvested balance at the end of fiscal 2020	25,434,597	$	18.72	$	452,736
Granted	10,927,370	9.76
Vested	(2,524,966)	17.57
Forfeited	(1,092,135)	18.17

Unvested balance at the end of the first quarter of fiscal 2021	32,744,866	$	15.83	$	438,253

During the first quarter of fiscal 2020 and 2021, we recognized $37.3 million and $46.8 million in stock-based compensation expense related to RSUs. At the end of the first quarter of fiscal 2021, total unrecognized employee compensation cost related to unvested RSUs was $476.1 million, which is expected to be recognized over a weighted-average period of 3.0 years.

Restricted Stock

A summary of the restricted stock activity under our 2015 Plan and related information is as follows:


	Number of Restricted Stock Outstanding	Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)
Unvested balance at the end of fiscal 2020	2,127,206	$	19.58	$	37,684

Vested	(543,859)	19.43
Forfeited/canceled	(229,605)	20.15

Unvested balance at the end of the first quarter of fiscal 2021	1,353,742	$	19.55	$	18,100

All unvested shares of restricted stock are subject to cancellation to the extent vesting conditions are not met. During the first quarter of fiscal 2020 and 2021, we recognized $7.5 million and $4.3 million in stock-based compensation expense related to restricted stock. At the end of the first quarter of fiscal 2021, total unrecognized employee compensation cost related to unvested restricted stock was $9.9 million, which is expected to be recognized over a weighted-average period of 1.6 years.

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense recognized in the condensed consolidated statements of operations (in thousands):


	First Quarter of Fiscal
	2020		2021
Cost of revenue—product	$	977	$	996
Cost of revenue—subscription services	3,951		3,392
Research and development	28,245		28,711
Sales and marketing	18,314		16,272
General and administrative	10,670		9,323
Total stock-based compensation expense	$	62,157	$	58,694

The tax benefit related to stock-based compensation expense for all periods presented was not material.