Stockholders' Equity and Equity Incentive Plans

12 Months Ended

Jan. 31, 2023

Equity [Abstract]

Stockholders' Equity and Equity Incentive Plans

Stockholders’ Equity and Equity Incentive Plans

Preferred Stock

In connection with the IPO in April 2019, our amended and restated certificate of incorporation became effective, which authorized the issuance of 200,000,000 shares of undesignated preferred stock with a par value of $0.001 with rights and preferences, including voting rights, designated from time to time by our board of directors. As of January 31, 2023 and 2022, there were no shares of convertible preferred stock issued and outstanding.

Dual-Class Common Stock Structure

In November 2018, we implemented a dual class common stock structure pursuant to which all the then-outstanding shares of our common stock were reclassified as Class B common stock and a new class of Class A common stock was authorized. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to 10 votes per share. The Class A and Class B common stock have the same dividend and liquidation rights. Each share of Class B common stock will automatically convert into one share of Class A common stock upon (a) any transfer of such share, except for certain permitted transfers described in our amended and restated certificate of incorporation and (b) the death of the holder of such share. In addition, each share of Class B common stock will be automatically converted into one share of Class A common stock upon the earliest of (a) the date that is six months following the death or incapacity of Eric S. Yuan (our CEO), (b) the date that is six months following the date that Mr. Yuan is no longer providing services to us or his employment is terminated for cause, (c) the date specified by the holders of a majority of the then-outstanding shares of convertible preferred stock, voting together on an as-converted basis, and the holders of a majority of the then-outstanding shares of Class B common stock, voting as a separate class, and (d) the 15-year anniversary of the closing of our IPO. In connection with the implementation of the dual-class common stock structure, each then-outstanding share of our convertible preferred stock became convertible into one share of Class B common stock, and all outstanding options to purchase shares of common stock became options to purchase an equivalent number of shares of Class B common stock.

Upon the effectiveness of the amended and restated certificate of incorporation in November 2018, the number of shares of common stock that are authorized to be issued consisted of 320,000,000 shares of Class A common stock, $0.001 par value per share and 300,000,000 shares of Class B common stock, $0.001 par value per share. Class A and Class B common stock are collectively referred to as “common stock” throughout the notes to the consolidated financial statements, unless otherwise noted.

Equity Financing

On January 15, 2021, we completed our follow-on public offering, in which we issued and sold 5,882,353 shares of our Class A common stock, including 735,294 shares pursuant to the full exercise of the underwriter's option to purchase additional shares, at $340.00 per share. We received aggregate proceeds of $1,980.0 million, net of underwriters’ discounts and commissions. The other related offering costs were immaterial.

Common Stock

Upon the completion of the IPO in April 2019, our amended and restated certificate of incorporation became effective, which also authorized the issuance of 2,000,000,000 shares of Class A common stock, $0.001 par value per share and 300,000,000 shares of Class B common stock, $0.001 par value per share.

We have the following shares of Class A common stock reserved for future issuance:

	As of January 31,
	2023	2022
Stock options outstanding	4,800,616	6,195,205
RSUs outstanding	21,868,533	5,546,366
ESPP purchase rights outstanding	2,851,856	1,784,687
Remaining shares available for future issuance under the 2011 and 2019 plan	51,367,359	56,620,720
Remaining shares available for future issuance under the ESPP	11,930,797	10,685,867
Total shares of Class A common stock reserved	92,819,161	80,832,845

Stock Repurchase Plan

In February 2022, our Board of Directors authorized a stock repurchase program of up to $1.0 billion of our Class A common stock, which was completed in December 2022. During the year ended January 31, 2023, we purchased and subsequently retired 11,170,907 shares of our Class A common stock for an aggregate amount of $1.0 billion.

Equity Incentive Plans

In 2011, we adopted the 2011 Global Share Plan (“2011 Plan”), under which officers, employees, and consultants were granted various forms of equity incentive compensation at the discretion of the board of directors, including stock options and restricted stock awards. In connection with the IPO, the shares of Class B common stock remaining available for issuance under the 2011 Plan became available for issuance for a corresponding number of shares of our Class A common stock under the 2019 Equity Incentive Plan (“2019 Plan”), which is a successor to and continuation of our 2011 Plan.

In April 2019, we adopted the 2019 Plan, which became effective in connection with our IPO. Our 2019 Plan provides for the grant of stock options, stock appreciation rights, RSU awards, performance awards, and other forms of awards. The awards generally vest over four years. The plan administrator determines the term of stock options granted under the 2019 Plan, up to a maximum of 10 years. The maximum number of shares of our Class A common stock that may be issued under our 2019 Plan will not exceed 58,300,889 shares of our Class A common stock, which is the sum of (1) 34,000,000 new shares, plus (2) an additional number of shares not to exceed 24,300,889, consisting of (A) shares that remain available for the issuance of awards under our 2011 Plan as of immediately prior to the time our 2019 Plan becomes effective and (B) shares of Class B common stock subject to outstanding stock options or other stock awards granted under our 2011 Plan that, on or after the 2019 Plan became effective, terminate, or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, as such shares become available from time to time. In addition, the number of shares of our Class A common stock reserved for issuance under our 2019 Plan automatically increases on February 1 of each calendar year, starting on February 1, 2020 through February 1, 2029, in an amount equal to (i) 5% of the total number of shares of our common stock (both Class A and Class B) outstanding on January 31 of the fiscal year before the date of each automatic increase or (ii) a lesser number of shares determined by our board of directors prior to the applicable February 1.

Stock Options

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

	Stock Options
	Outstanding Stock Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
	(in thousands, except share, life and per share data)
Outstanding as of January 31, 2022	6,195,205	$	8.08	6.0	$	905,744
Exercised	(1,299,758)	$	6.60		$	121,539
Canceled/forfeited/expired	(94,831)	$	21.11
Outstanding as of January 31, 2023	4,800,616	$	8.22	4.9	$	322,929
Vested and expected to vest as of January 31, 2023	4,800,616	$	8.22	4.9	$	322,929
Exercisable as of January 31, 2023	4,747,885	$	7.77	4.9	$	321,287

There were no options granted for the fiscal years ended January 31, 2023, 2022 and 2021. The intrinsic value of the options exercised, which represents the difference between the fair market value of our common stock on the date of exercise and the exercise price of each option, was $121.5 million, $843.0 million, and $1,786.7 million during the fiscal years ended January 31, 2023, 2022, and 2021, respectively. As of January 31, 2023, unrecognized stock-based compensation expense related to outstanding unvested stock options was $1.2 million, which is expected to be recognized over a weighted-average period of 0.3 years.

Restricted Stock Units

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

	RSUs
	Unvested RSUs	Weighted-Average Grant Date Fair Value Per Share
Unvested as of January 31, 2022	5,546,366	$	232.58
Granted	22,136,660	$	93.20
Vested	(3,977,915)	$	173.22
Forfeited	(1,836,578)	$	148.82
Unvested as of January 31, 2023	21,868,533	$	109.31

In October 2021, we added a feature that modified certain existing RSU awards to provide for a supplemental award based on certain future stock price criteria. The feature was subsequently modified in March and October 2022 to provide potential additional supplemental awards. The features and resulting modifications resulted in incremental stock-based compensation expense that is being recognized from the respective modification dates through the remaining requisite service period for each of the original awards. In November 2022, we cancelled one of the features related to a sub-population of the modified awards. As a result, the amount of the unrecognized compensation cost as calculated using a Monte Carlo valuation approach related to the cancelled awards of $207.7 million was recognized during the quarter ended January 31, 2023.

As of January 31, 2023, unrecognized stock-based compensation expense related to outstanding unvested RSUs was $2,579.0 million, including the impact of the modification, which is expected to be recognized over a weighted-average period of 2.8 years.

2019 Employee Stock Purchase Plan

In April 2019, we adopted the 2019 ESPP, which became effective in connection with the IPO. A total of 9,000,000 shares of our Class A common stock were initially reserved for issuance under the ESPP. The number of shares of our Class A common stock reserved for issuance automatically increases on February 1 of each calendar year, beginning on February 1, 2020 through February 1, 2029, by the lesser of (1) 1% of the total number of shares of our common stock (both Class A and Class B) outstanding on the last day of the fiscal year before the date of the automatic increase, and (2) 7,500,000 shares; provided that before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2).

Under our current ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lesser of (1) 85% of the fair market value of a share of our Class A common stock on the first date of an offering or (2) 85% of the fair market value of a share of our Class A common stock on the date of purchase. No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our Class A common stock based on the fair market value per share of our Class A common stock at the beginning of an offering for each calendar year such purchase right is outstanding or 3,000 shares. The 2019 ESPP provides for, at maximum, 27 months offering periods with four offering dates, generally in June and December of each year. The first offering period began on April 18, 2019. During the fiscal years ended January 31, 2023, 2022, and 2021, 678,279, 838,395, and 923,553 shares, respectively, of our Class A common stock were purchased under the ESPP.

As of January 31, 2023, unrecognized stock-based compensation expense related to the ESPP was $72.7 million, which is expected to be recognized over a weighted-average period of 1.4 years.

We estimated the fair value of ESPP purchase rights using a Black-Scholes option-pricing model with the following assumptions:

	Year Ended January 31,
	2023	2022	2021
Expected term (years)	0.5 - 2.0	0.5 - 2.1	0.5 - 2.1
Expected volatility	57.6% - 64.6%	40.3% - 75.0%	40.3% - 75.0%
Risk-free interest rate	2.2% - 4.8%	0.0% - 2.5%	0.1% - 2.5%
Expected dividend yield	—	—	—

The stock-based compensation expense by line item in the accompanying consolidated statements of operations is summarized as follows:

	Year Ended January 31,
	2023		2022		2021
	(in thousands)
Cost of revenue	$	174,546	$	69,612	$	34,960
Research and development	361,720		113,000		50,161
Sales and marketing	532,371		229,297		146,377
General and administrative	217,115		65,378		44,320
Total stock-based compensation expense	1,285,752		477,287		275,818
Benefit from income taxes	(199,971)		(84,245)		—
Total stock-based compensation expense recorded to net income	$	1,085,781	$	393,042	$	275,818