Stock-Based Compensation

12 Months Ended

Jul. 31, 2021

Share-based Payment Arrangement [Abstract]

2011 Equity Incentive Plan

In 2011, we adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provided for the grant of stock-based awards to employees, directors, and nonemployees under terms and provisions established by the board of directors.

The 2011 Plan allowed for the grant of incentive stock options or nonqualified stock options as well as restricted stock units, restricted stock, and stock appreciation rights. Only incentive and nonqualified stock options were granted under the 2011 Plan. Employee stock option awards generally vest 25% on the first anniversary of the grant date with the remaining shares subject to the option vesting ratably over the next three years. Options generally expire after 10 years. Effective upon our initial public offering in 2017, the 2011 Plan was replaced by the 2017 Incentive Plan.

2017 Incentive Plan

In November 2017, our board of directors and stockholders adopted our 2017 Incentive Plan (the “2017 Plan”). The remaining shares available for issuance under our 2011 Plan became reserved for issuance under the 2017 Plan. Our 2017 Plan provides for the grant of Class A incentive stock options to employees, including employees of any parent or subsidiary, and for the grant of nonqualified stock options, stock appreciation rights, restricted stock (“RSU”) awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of stock awards to employees, directors, and consultants, including employees and consultants of our subsidiaries. Employee stock option awards generally vest 25% on the first anniversary of the grant date with the remaining shares subject to the option vesting ratably over the next three years. Options generally expire after 10 years. RSU awards generally vest 25% on the first anniversary of the grant date with the remaining RSU awards vesting ratably over the next three years. The number of shares authorized for issuance under the 2017 Plan was 27,395,455 shares of Class A common stock as of July 31, 2021.

2019 Inducement Plan

In October 2019, our board of directors adopted our 2019 Inducement Plan (the “2019 Plan”). Our 2019 Plan provides for the grant of nonqualified stock options and restricted stock unit awards with respect to our Class A common stock to individuals who satisfy the standards for inducement grants under the relevant Nasdaq Stock Market rules. The number of shares authorized for issuance under the 2019 Plan was 4,750,000 shares of Class A common stock as of July 31, 2021.

Stock Options

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.

The following table summarizes the shares available for grant under the 2017 Plan:


						Shares Available for Grant
Balance – August 1, 2020						916,172
Authorized						5,187,757
Granted						(6,605,011)

Forfeited						4,668,798
Balance – July 31, 2021						4,167,716

Stock option activity under the 2011 Plan, 2017 Plan, and 2019 Plan is as follows:


	Options Outstanding
	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (in thousands)
Balance – August 1, 2020	6,817,196	$	17.10	7.41	$	40,252

Granted	633,659	57.26
Exercised	(2,067,751)	12.53
Forfeited	(1,732,622)	19.63
Balance – July 31, 2021	3,650,482	$	25.47	7.40	$	106,490
Options vested and exercisable - July 31, 2021	1,817,354	$	18.83	6.61	$	63,912
Options vested and expected to vest - July 31, 2021	3,558,106	$	25.44	7.38	$	103,883

The weighted-average grant date fair value of options granted during 2021, 2020, and 2019 was $29.07, $11.35, and $11.60 per share, respectively. The total grant date fair value of options that vested during 2021, 2020, and 2019 was $13.3 million, $15.3 million, and $13.1 million, respectively. The aggregate intrinsic value of options exercised during 2021, 2020, and 2019 was $78.3 million, $19.1 million, and $49.1 million, respectively. The aggregate intrinsic value of options exercised is the difference between the fair value of the underlying common stock on the date of exercise and the exercise price for in-the-money stock options.

Restricted Stock Units

Employee restricted stock units are granted under the 2017 Plan and 2019 Plan, settle into Class A common stock, and generally vest 25% on the first anniversary of the grant date with the remaining vesting ratably over the next three years.

The following table summarizes the restricted stock unit (“RSU”) award activity under the 2017 Plan and 2019 Plan:


	Unvested RSUs
	Class A Common Stock	Weighted- Average Grant Date Fair Value
Unvested at August 1, 2020	9,123,341	$	20.11
Granted	6,463,980	40.33
Vested	(2,132,298)	21.62
Forfeited	(3,190,098)	23.83
Unvested at July 31, 2021	10,264,925	$	31.35

Stock-Based Compensation Expense

Stock-based compensation expense for options and RSUs granted to employees was $100.7 million, $67.5 million, and $35.2 million for 2021, 2020, and 2019, respectively. The income tax benefit related to stock-based compensation was $25.6 million, $17.2 million, and $8.9 million for 2021, 2020, and 2019, respectively. Stock-based compensation expense is included in selling, general, and administrative expenses in our consolidated statements of operations.

As of July 31, 2021, the total unrecognized compensation expense related to unvested options and RSUs, net of estimated forfeitures, was $298.5 million, which we expect to recognize over an estimated weighted average period of 2.4 years.

In determining the fair value of the stock-based awards, we use the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment.

Fair Value of Common Stock - As of July 31, 2021, the fair value of the shares of common stock underlying our stock options has been determined based on market prices. Prior to our IPO on November 16, 2017, the fair value of the shares of common stock underlying our stock options was determined by the board of directors. As there was no public market for our common stock, the board of directors determined the fair value of the common stock on the stock option grant date by considering a number of objective and subjective factors, including third-party valuations of our common stock, sales of our common stock, operating and financial performance, the lack of marketability of our common stock and general macroeconomic conditions.

Expected Term - The expected term represents the period that our stock options are expected to be outstanding and is determined using the simplified method (generally calculated as the mid-point between the vesting date and the end of the contractual term).

Expected Volatility - The expected volatility was estimated based on the average volatility for publicly traded companies that we considered comparable, over a period equal 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 zero coupon notes in effect at the time of grant for periods corresponding with the expected term of the option.

Expected Dividend - We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock; therefore, we use an expected dividend yield of zero.

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:


	For the Fiscal Year Ended
	July 31, 2021		August 1, 2020		August 3, 2019
Expected term (in years)	5.3 - 6.3		5.5 - 6.2		5.1 - 6.5
Volatility	55.5 - 55.9%		50.1 - 51.2%		41.7 - 52.2%
Risk free interest rate	0.3 - 1.1%		1.4 - 1.7%		2.3 - 3.0%
Dividend yield	—	%	—	%	—	%

Early Exercise of Employee Options

We allow certain employees to exercise options granted under the 2011 Plan prior to vesting in exchange for shares of restricted common stock subject to a right of repurchase that lapses according to the original option vesting schedule. The proceeds from the exercise of options are recorded in other current liabilities and other long-term liabilities in our consolidated balance sheets at the time the options are exercised and reclassified to common stock and additional paid-in capital as our repurchase right lapses. Upon termination of employment, any unvested shares are subject to repurchase by us at the original purchase price.

We did not issue any shares upon exercise of unvested stock options during 2021, 2020, and 2019. As of July 31, 2021, and August 1, 2020, there were no shares of common stock subject to repurchase.