7.	Stock-Based Compensation

2011 Equity Incentive Plan

In 2011, we adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provided for the granting of stock-based awards to employees, including directors and non-employees under terms and provisions established by the board of directors. The number of shares authorized for issuance under the 2011 Plan was 23,223,374 as of October 28, 2017, of which 1,726,679 were available for grant.

The 2011 Plan allowed for the grant incentive stock options or nonqualified stock options as well as restricted stock units, restricted stock and stock appreciation rights. As of October 28, 2017, we had only granted incentive and nonqualified stock options under the 2011 Plan. Employee stock options generally vest 25% on the first anniversary of the grant date with the remaining vesting ratably over the next three years. Options generally expire after 10 years. Stock option activity under the 2011 Plan is as follows:

				Options Outstanding
	Shares Available for Grant			Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
											(In thousands)
Balance – July 29, 2017		2,023,424			10,218,912		$	7.12		8.53	$	166,670
Repurchased		19,479
Granted		(867,865	)		867,865		$	23.43
Exercised		—			(211,236	)	$	2.10
Cancelled		551,641			(551,641	)	$	4.01
Balance – October 28, 2017		1,726,679			10,323,900		$	8.76		8.45	$	87,531

The aggregate intrinsic value is the difference between the current fair value of the underlying common stock and the exercise price for in-the-money stock options.

Stock-Based Compensation Expense

Stock-based compensation expense for options granted to employees was $2,038,000 and $552,000 for the three months ended October 28, 2017 and October 29, 2016, respectively. Stock-based compensation expense for options granted to non-employees was none for the three months ended October 28, 2017 and $58,000 for the three months ended October 29, 2016. Stock-based compensation expense is included in selling, general and administrative expenses in our condensed consolidated statements of operations.

The weighted-average grant date fair value of options granted during the three months ended October 28, 2017 and October 29, 2016 was $7.55 per share and $2.53 per share, respectively. As of October 28, 2017, the total unrecognized compensation expense related to unvested options, net of estimated forfeitures, was $36.8 million which we expect to recognize over an estimated weighted average period of 3.6 years.

We record stock-based compensation of stock options granted to employees by estimating the fair value of stock-based awards using the Black-Scholes option pricing model and amortizing the fair value of the stock-based awards granted over the applicable vesting period of the awards on a straight-line basis. The fair value of stock options granted to employees was estimated at the grant date using the Black- Scholes option-pricing model with the following assumptions:

	Three Months Ended
	October 28, 2017	October 29, 2016
Expected term (in years)	5.6 – 6.5	5.4 – 6.5
Volatility	42.1 – 43.5%	44.4 – 46.0%
Risk free interest rate	1.9 – 2.0%	1.3 – 1.5%
Dividend yield	— %	— %

In July 2017, we granted options to certain members of our executive management team to purchase an aggregate of 1,097,463 shares of common stock which had both a service-based condition and a liquidity event-related performance condition. Such options vest ratably over the 24 month period following the fourth anniversary of the grant date, subject to an IPO occurring within 12 months of the grant date and the option holder’s continuous service through each vesting date. The aggregate grant-date fair value of such option awards was $14.0 million. As of October 28, 2017, achievement of the performance condition was not deemed probable and accordingly, no expense was recognized related to these option awards through October 28, 2017.

The achievement of the performance condition was deemed probable upon consummation of the IPO in November 2017 at which time we recorded a cumulative catch-up stock based compensation expense related to periods prior to the IPO.