Stock-Based Compensation

12 Months Ended

Jan. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

Stock-Based Compensation Expense

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

	Year Ended January 31,
	2024		2023
Cost of revenue	$	17,187	$	10,093
Research and development	61,055		51,771
Sales and marketing	55,798		40,115
General and administrative	83,890		62,487
Restructuring	(1,060)		—
Total	$	216,870	$	164,466

2021 Equity Incentive Plan

In May 2021, our board of directors and in June 2021, our stockholders approved our 2021 Equity Incentive Plan (2021 Plan) as a successor to our 2013 Equity Incentive Plan (2013 Plan) and 2011 Stock Incentive Plan (2011 Plan) with the purpose of granting stock-based awards to employees, directors, officers and consultants, including stock options, restricted stock awards, restricted stock units (RSUs), and performance stock units (PSUs). A total of 35,281,596 shares of Class A common stock were initially available for issuance under the 2021 Plan. Our compensation committee administers the 2021 Plan. The number of shares of our Class A common stock available for issuance under the 2021 Plan is subject to an annual increase on the first day of each fiscal year beginning on February 1, 2022, equal to the lesser of: (i) five percent (5%) of the aggregate number of outstanding shares of all classes of our common stock as of the last day of the immediately preceding fiscal year or (ii) such other amount as our board of directors may determine.

The 2013 Plan and 2011 Plan (together, the Prior Plans) were terminated in June 2021, in connection with the adoption of our 2021 Plan, and stock-based awards are no longer granted under the Prior Plans. However, the Prior Plans will continue to govern the terms and conditions of the outstanding awards previously granted thereunder. Any shares underlying stock options that are expired, canceled, forfeited or repurchased under the Prior Plans will be automatically transferred to the 2021 Plan and be available for issuance as Class A common stock.

Restricted Stock Units and Performance Stock Units

A summary of our RSU and PSU activity is as follows:

	Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 31, 2023	14,409,166	$	27.37
Granted	22,822,240	17.17
Released	(6,021,877)	25.15
Forfeited	(3,803,072)	22.17
Outstanding as of January 31, 2024	27,406,457	$	20.08

As of January 31, 2024, we had unrecognized stock-based compensation expense related to unvested RSUs of $482.6 million that is expected to be recognized on a straight-line basis over a weighted-average period of 2.95 years.

As of January 31, 2024, we had unrecognized stock-based compensation expense related to unvested PSUs of $3.8 million that is expected to be recognized on a straight-line basis over a weighted-average period of 2.13 years.

During fiscal 2024, we granted PSUs covering 1,133,455 shares of Class A common stock at target to certain executives subject to service-based and performance-based vesting conditions. As of January 31, 2024, the financial performance metrics have not been achieved. As such, we have not recorded any stock-based compensation expense and have no unrecognized stock-based compensation expense related to these PSUs.

In November 2023, we granted 312,686 PSUs with a grant date fair value of $5.4 million subject to service-based and performance-based vesting conditions to retain the services of certain former KSG employees. These PSUs will vest 100% upon the achievement of certain financial performance and integration milestone events, subject to the employees’ continued service to us from the grant date through the milestone events or target dates. For further details, refer to Note 4, Acquisitions.

Stock Option Information

A summary of our stock option activity is as follows:

	Number of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of January 31, 2023	32,446,814	$	4.71	6.52	$	337,214
Granted	—	—
Exercised	(10,298,114)	2.75
Forfeited	(988,850)	5.60
Outstanding as of January 31, 2024	21,159,850	$	5.63	6.25	$	447,989
Expected to vest as of January 31, 2024	21,159,850	$	5.63	6.25	$	447,989
Vested and exercisable as of January 31, 2024	15,633,560	$	4.51	5.96	$	348,522

There were no options granted during fiscal 2024 and 2023. The weighted-average grant-date fair value of options granted during fiscal 2022 was $13.14 per share.

The aggregate intrinsic value is the difference between the exercise price and the estimated fair value of the underlying common stock. The aggregate intrinsic value of options exercised during fiscal 2024, 2023 and 2022 was $170.1 million, $173.0 million and $333.7 million, respectively.

As of January 31, 2024, we had unrecognized stock-based compensation expense related to unvested options of $51.8 million that is expected to be recognized on a straight-line basis over a weighted-average period of 1.85 years.

Milestone Options

In March 2021, we granted 1,404,605 options to purchase shares of common stock subject to service-based, performance-based, and market-based vesting conditions to our Chief Executive Officer and Chief Financial Officer under the 2013 Plan. These stock options will vest 100% upon the occurrence of i) our IPO (the performance-based vesting condition), which was completed in June 2021, and ii) the achievement of a certain market capitalization target (the market-based vesting condition), subject to the executive’s continued service to us from the grant date through the milestone event. As of January 31, 2024, the market capitalization target has not yet been achieved, and therefore, these milestone options remain unvested. For these options, we used a Monte Carlo simulation to determine the fair value at the grant date and the implied service period.

We recorded stock-based compensation expense related to these milestone options of $3.6 million, $3.6 million, and $3.1 million during fiscal 2024, 2023, and 2022, respectively. As of January 31, 2024, we had unrecognized stock-based compensation expense related to unvested milestone options of $9.1 million, that is expected to be recognized over the remaining implied service period of 2.6 years.

Restricted Common Stock

In connection with the Attivo acquisition, we issued restricted Class A common stock to Attivo’s employees. We recorded stock-based compensation expense related to these restricted shares in connection with the Attivo acquisition of $0.7 million and $1.0 million during fiscal 2024 and 2023, respectively. As of January 31, 2024, we had unrecognized stock-based compensation expense related to this unvested restricted common stock of $0.3 million.

In connection with the Scalyr acquisition, we granted 1,315,099 shares of restricted common stock. We recorded stock-based compensation expense related to restricted common stock in connection with the Scalyr acquisition of $0.2 million, $8.5 million, and $10.9 million during fiscal 2024, 2023, and 2022, respectively. As of January 31, 2024, this restricted common stock has fully vested.

Employee Stock Purchase Plan (ESPP)

In May 2021, our board of directors, and in June 2021, our stockholders approved our ESPP, which became effective on the date of effectiveness of our Final Prospectus, or June 29, 2021. The ESPP initially reserved and authorized the issuance of up to a total of 7,056,319 shares of common stock to eligible employees. The number of shares reserved for issuance and sale under the ESPP will automatically increase on the first day of each fiscal year, starting on February 1, 2022 for the first ten calendar years after the first offering date, in an amount equal to (i) 1% of the aggregate number of outstanding shares of all class our common stock on the last day of the immediately preceding fiscal year, or (ii) such other amount as the administrator of the ESPP may determine. The ESPP generally provides for six-month offering periods beginning January 6 and July 6 of each year, with each offering period consisting of single six-month purchase periods, except for the initial offering period which began on July 1, 2021, and ended on July 5, 2023. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of i) the fair market value of our common stock as of the beginning of the offering period or ii) the fair market value of our common stock on the purchase date, as defined in the ESPP, except for the initial offering period that had a 24-month look back to the IPO price of $35.

The following table summarizes the assumptions used in estimating the fair value of employee stock purchase rights using the Black-Scholes option pricing model for the periods presented:

	Year Ended January 31,
	2024		2023
Expected term (in years)	0.5		0.5 - 1.0
Expected volatility	55% - 85%		72% - 96%
Risk-free interest rate	5.2% - 5.5%		2.6% - 4.8%
Dividend yield	—	%	—	%

We recognized stock-based compensation expense related to ESPP of $11.7 million, $12.7 million, and $5.5 million during fiscal 2024, 2023, and 2022, respectively.

Modifications

During fiscal 2024 and 2023, certain members of our management team converted to non-employee consultants or to positions that no longer provide substantive service to the Company (Management Transitions). The Management Transitions have been accounted for as modifications, under which, the exercise period of certain vested awards has been extended and a certain number of unvested awards will vest through the end of the agreements entered into in connection with the Management Transitions.

During fiscal 2024 and 2023, we recognized an incremental charge of $6.2 million and $4.5 million, respectively, related to the Management Transitions.