Equity Incentive Plans

3 Months Ended

May 07, 2023

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 serves as the successor to our 2009 Plan and provides for grants of incentive stock options to our employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance stock awards, performance cash awards, and other forms of stock awards to our employees, directors and consultants. Our equity awards generally vest over a two to four year period and expire no later than ten years from the date of grant.

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.

2015 Amended and Restated Employee Stock Purchase Plan

Under our Amended and Restated 2015 Employee Stock Purchase Plan (2015 ESPP), our Board of Directors (or a committee thereof) has the authority 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, a dollar cap of $7,500 per purchase period, or $25,000 in any calendar year (as determined under applicable tax rules). 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-month 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 offering would automatically be enrolled in the new offering (ESPP reset), resulting in a modification charge to be recognized over the new offering period. An ESPP reset occurred during the first quarter of fiscal 2024, and $16.7 million relating to this modification is being recognized over the new offering period ending March 15, 2025.

Stock-based compensation expense related to our 2015 ESPP was $6.9 million and $6.1 million during the first quarter of fiscal 2023 and 2024. At the end of the first quarter of fiscal 2024, total unrecognized stock-based compensation cost related to our 2015 ESPP was $49.6 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 2023	9,268,498	$	10.90	2.7	$	176,674

Options exercised	(790,240)	5.85
Options forfeited	(1,778)	1.90
Balance at the end of the first quarter of fiscal 2024	8,476,480	$	11.37	2.5	$	95,984
Vested and exercisable at the end of the first quarter of fiscal 2024	8,346,944	$	11.46	2.4	$	93,301

The aggregate intrinsic value of options vested and exercisable at the end of the first quarter of fiscal 2024 is calculated based on the difference between the exercise price and the closing price of $22.64 of our common stock on the last day of the first quarter of fiscal 2024.

Stock-based compensation expense recognized related to stock options was $1.5 million and $0.7 million during the first quarter of fiscal 2023 and 2024.

At the end of the first quarter of fiscal 2024, total unrecognized employee stock-based compensation cost related to outstanding options was $1.7 million, which is expected to be recognized over a weighted-average period of 0.9 years.

RSUs and Performance RSUs (PRSUs)

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


	Number of RSUs and PRSUs Outstanding	Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)
Unvested balance at the end of fiscal 2023	26,760,520	$	24.78	$	800,407
Granted	14,435,336	24.20

Vested	(3,669,301)	23.28
Forfeited	(1,439,343)	24.06

Unvested balance at the end of the first quarter of fiscal 2024	36,087,212	$	24.72	$	817,026

RSUs granted during the first quarter of fiscal 2024 include PRSUs for 1,590,615 shares of common stock, at a target percentage of 100%, with both performance and service vesting conditions. The actual PRSUs earned will range from 0% to 150% of the target number granted, contingent upon the degree to which the fiscal 2024 performance condition is met. Any portion of shares that are not earned will be canceled. In addition, during the first quarter of fiscal 2024, we issued 579,096 PRSUs based on the actual attainment of fiscal 2023 performance conditions for previously issued PRSUs, with these PRSUs issued subject to service condition through the remaining vesting periods.

Stock-based compensation expense recognized related to RSUs and PRSUs was $66.2 million and $71.0 million during the first quarter of fiscal 2023 and 2024. At the end of the first quarter of fiscal 2024, total unrecognized employee stock-based compensation cost related to unvested RSUs and PRSUs was $822.7 million, which is expected to be recognized over a weighted-average period of 3.0 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
	2023		2024
Cost of revenue—product	$	1,863	$	2,655
Cost of revenue—subscription services	5,356		5,647
Research and development	36,517		38,232
Sales and marketing	18,345		17,181
General and administrative	12,490		14,115
Total stock-based compensation expense	$	74,571	$	77,830

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