Equity

12 Months Ended

Jan. 31, 2022

Equity [Abstract]

Equity

9. Equity

In connection with the IPO, on October 18, 2021, the Company filed a restated certificate of incorporation that authorized the issuance of 1,500,000,000 shares of Class A common stock, 250,000,000 shares of Class B common stock, and 50,000,000 shares of preferred stock at $0.0000025 par value for each class of shares. Common stockholders are entitled to dividends when and if declared by the board of directors. No dividends have been declared to date. The holder of each share of Class A common stock is entitled to one vote and the holder of each share of Class B common stock is entitled to ten votes.

Common Stock

On October 18, 2021, the Company closed its IPO of 8,940,000 shares of Class A common stock at an offering price of $77.00 per share, including 520,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares of Class A common stock, resulting in net proceeds to the Company of $654.6 million, after deducting underwriting discounts of $33.8 million, and before the deferred offering costs. Upon consummation of the IPO, the deferred offering costs of $4.7 million were reclassified into stockholders’ equity as a reduction of the IPO proceeds on the consolidated balance sheets. In addition, an entity affiliated with our founder and the CEO sold 2,500,000 shares of our Class A common stock (upon conversion of shares of Class B common stock) at the IPO. The Company did not receive any proceeds from the sale of shares of its Class A common stock by the selling stockholder.

The Company had shares of common stock reserved for future issuance, on an as-converted basis, as follows (in thousands):

	January 31, 2022	January 31, 2021
Class A and Class B common stock
Convertible preferred stock	—	79,551
Options issued and outstanding	17,146	16,043
Shares available for issuance under Equity Incentive Plans	18,248	4,796
RSUs issued and outstanding	3,280	—
Shares reserved for issuance to charitable organizations	1,636	—
2021 ESPP	3,271	—
Warrants issued and outstanding (1)	—	73
Total	43,581	100,463

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(1)Concurrent with the Loan and Security Agreement discussed in “Note 7. Debt Financing”, the Company had issued warrants to the financial institution for shares of the Company’s Class B common stock at an effective

strike price of $1.18 per share. The warrants were issued in two tranches that expire in Fiscal 2027 and Fiscal 2029, respectively. The warrants were classified in equity with negligible carrying value. On November 18, 2021, the Company received a request for the exercise of all of its warrants outstanding. Pursuant to these exercises, the Company issued 72,772 shares of Class B common stock against the $0.1 million cash proceeds received.

Early Exercised Options (subject to a repurchase right)

Certain stock option holders have the right to exercise unvested options, subject to a repurchase right held by the Company at the original exercise price, in the event of voluntary or involuntary termination of employment of the holder. As of January 31, 2022 and 2021, there were 713,967 and 1,197,150 shares, respectively, of unvested options that had been early exercised and were subject to repurchase for a total liability of $6.8 million and $8.1 million, respectively. The liability associated with early exercised options is included in other long-term liabilities in the consolidated balance sheets.

For accounting purposes, issuance of shares will be recognized only on vesting. However, shares issued for the early exercise of options are included in issued and outstanding shares as they are legally issued and outstanding.

Convertible Preferred Stock

Upon the closing of the IPO, all shares of the Company’s convertible preferred stock outstanding of 79.6 million were automatically converted into an equal number of shares of Class B common stock and their carrying value of $424.9 million was reclassified into stockholders’ equity. As of January 31, 2022, there were no shares of convertible preferred stock issued and outstanding.

The following table summarizes the convertible preferred stock outstanding immediately prior to the conversion into common stock upon the closing of the IPO (in thousands):

Convertible Preferred Stock	Shares Authorized	Shares Issued and Outstanding	Net Carrying Value
Series safe A1	539	539	100
Series safe A2	5,111	4,911	1,105
Series safe A3	1,600	1,600	450
Series A	12,393	12,393	3,954
Series B	21,109	20,901	19,743
Series C	12,282	12,282	21,935
Series D	12,512	12,512	109,440
Series E	14,413	14,413	268,177
Total	79,959	79,551	424,904

Equity Incentive Plans

In 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”), in which shares of common stock of the Company are reserved for issuance of stock options to team members, directors, or consultants. The options generally vest 25% upon completion of one year and then ratably over 36 months. Options generally expire ten years from the date of grant. All these options qualify as equity settled awards and contain no performance conditions.

In September 2021, in connection with the IPO, our board of directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to our 2015 Plan (together the “Plans”). The 2021 Plan authorizes the award of both stock options, which are intended to qualify for tax treatment under Section 422 of the Internal Revenue Code, and nonqualified stock options, as well for the award of restricted stock awards (“RSAs”), stock appreciation rights (“SARs”), RSUs, and performance and stock bonus awards. Pursuant to the 2021 Plan, incentive stock options may be granted only to our team

members. We may grant all other types of awards to our team members, directors, and consultants. We have initially reserved 13,032,289 shares of our Class A common stock, plus any reserved shares of Class B common stock not issued or subject to outstanding grants under the 2015 Plan on the effective date of the 2021 Plan, for issuance as Class A common stock pursuant to awards granted under our 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase automatically on February 1 of each of the years from 2022 through 2031. As such, effective as of February 1, 2022, 7,344,382 shares were added to the 2021 Plan.

The awards available for grant under the above Plans for the periods presented were as follows (in thousands):

	January 31, 2022	January 31, 2021
Available at beginning of period	4,796	1,540
Awards authorized	22,532	5,788
Options granted	(7,936)	(4,622)
RSUs granted	(3,290)	—
RSUs cancelled and forfeited	10	—
Options cancelled and forfeited	2,044	1,970
Options repurchased	92	120
Available at end of period	18,248	4,796

In the event that shares previously issued under the above Plans are reacquired by the Company, such shares shall be added to the number of shares then available for issuance under the Plans. In the event that an outstanding stock option for any reason expires or is canceled, the shares allocable to the unexercised portion of such stock option will be added to the number of shares then available for issuance under the Plans.

The 2015 Plan allows the grantees to early exercise stock options.

Stock Options and RSUs

The following table summarizes options activity under our Plans, and related information:

	Number of Stock Options Outstanding (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Years	Aggregate Intrinsic value (in millions)
Balances at January 31, 2019	9,817	$	1.67	8.79	$	24.0
Options granted	10,632	6.20		8.99
Options exercised	(2,141)	1.44		4.91
Options cancelled	(164)	0.61		—
Options forfeited	(1,891)	2.64		—
Balances at January 31, 2020	16,253	$	4.56	9.03	$	70.6
Options granted	4,622	11.27		9.11
Options exercised	(2,862)	4.87		5.56
Options cancelled	(79)	3.79		—
Options forfeited	(1,891)	5.50		—
Balances at January 31, 2021	16,043	$	6.33	8.39	$	166.6
Options granted	7,936	18.68		8.50

Options exercised	(4,789)	5.40		5.07
Options cancelled	(81)	6.20		—
Options forfeited	(1,963)	10.47		—
Balances at January 31, 2022	17,146	$	11.83	8.24	$	894.8
Exercisable at January 31, 2022	17,146
Options vested at January 31, 2022	4,968	$	5.22	7.09	$	292.1
Options expected to vest at January 31, 2022	12,178	$	14.52	8.71	$	602.8

The aggregate grant-date fair value of options vested during the years ended January 31, 2022, 2021 and 2020 was $10.8 million, $8.2 million and $1.8 million, respectively. The weighted-average grant-date fair value per share of options granted was $10.81, $3.55 and $2.04 for the years ended January 31, 2022, 2021 and 2020, respectively. The aggregate intrinsic value of options exercised during the years ended January 31, 2022, 2021 and 2020 was $280.5 million, $33.8 million and $16.0 million, respectively. The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s estimated stock price at the time of exercise and the exercise price, multiplied by the number of related in-the-money options) that would have been received by the option holders had they exercised their options at the end of the period.

During the year ended January 31, 2022, we granted 0.3 million RSUs to our team members under our 2021 Plan at $82.10 grant-date fair value per share. These RSUs are grants of shares of our common stock, the vesting of which is based on the requisite service requirement. Generally, our RSUs are subject to forfeiture and are expected to vest over two to four years ratably on a combination of bi-annual and quarterly basis. RSUs vested or cancelled during the year ended January 31, 2022 were not material.

As of January 31, 2022 and 2021, approximately $101.8 million and $26.8 million of total unrecognized compensation cost was related to stock options and restricted stock awards granted, that is expected to be recognized over a weighted-average period of 2.3 years and 1.3 years, respectively. The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures.

Determining Fair Value of Stock Options

The fair value of each stock option grant was estimated on the date of grant, using a Black-Scholes option-pricing model, with the following weighted-average assumptions:

	Fiscal Year Ended January 31,
	2022		2021		2020
Risk-free interest rate	1.10	%	0.50	%	1.90	%
Weighted-average volatility	43.50	%	31.90	%	30.30	%
Weighted-average expected term (in years)	6.10		6.02		6.04
Dividend yield	—	%	—	%	—	%

Prior to the IPO, the Company estimated the volatility of common stock on the date of grant based on the average historical stock price volatility of comparable publicly-traded companies in the Company's industry group. After the IPO, the Company will continue to use the historical volatility of comparable publicly-traded companies until we establish a sufficient public trading history.

The expected term is based on the simplified method for grants to employees and on the contractual term for non-employees. The simplified method is used given the lack of historical exercise behavior data in the Company.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is zero percent as the Company has not paid and does not anticipate paying dividends on common stock.

CEO Performance Award

In May 2021, the Company granted 3 million RSUs tied to our Class B common stock to Mr. Sijbrandij, our founder and the CEO, with an estimated aggregate grant date fair value of $8.8 million, estimated utilizing a Monte Carlo valuation model. The model assumed a share price volatility of 45% and a risk free rate of 1.52%. The RSUs contain a service condition and a performance condition based on the achievement of eight separate stock price hurdles/tranches ranging from $95 to $500 per share on a recognized stock exchange or a per share price received in a corporate transaction defined in the grant. The price hurdles will adjust for stock splits, recapitalizations, and the like. Provided that Mr. Sijbrandij continues to be the CEO of the Company, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock price hurdles are achieved. We will recognize total stock-based compensation expense of $8.8 million over the requisite service period of each tranche, which ranged from 2.83 to 7.50 years, using the accelerated attribution method. If the stock price hurdles are met sooner than the derived service period, the Company will adjust the stock-based compensation expense to reflect the cumulative expense associated with the vested portion of these RSUs.

The Company recorded $1.2 million of stock-based compensation expense related to the CEO RSUs during the year ended January 31, 2022. As of January 31, 2022, unrecognized stock-based compensation expense related to these RSUs was $7.6 million which will be recognized over the remaining derived service period of the respective tranches.

2021 Employee Stock Purchase Plan (“ESPP”)

In September 2021, our board of directors and our stockholders approved our 2021 Employee Stock Purchase Plan (“ESPP”) to enable eligible team members to purchase shares of our Class A common stock with accumulated payroll deductions and provides a 15% purchase price discount of the fair market value of the Company’s Class A common stock on the enrollment date or purchase date, whichever is lower, as well as up to a 27-month look-back period. We have initially reserved 3,271,090 shares of our Class A common stock for issuance and sale under our 2021 ESPP with automatic increase on February 1 for the first ten calendar years. As such, effective as of February 1, 2022, 1,468,876 shares of our Class A common stock were added to our 2021 ESPP.

The following table summarizes the weighted-average assumptions used in estimating the fair value of the ESPP for the initial offering period using the Black-Scholes option-pricing model:

	Fiscal Year Ended January 31,
	2022
Risk-free interest rate	0.07	%
Weighted-average volatility	38.47	%
Weighted-average expected term (in years)	0.57
Dividend yield	—	%

The Company recorded $5.1 million of stock-based compensation expense related to the ESPP during the year ended January 31, 2022.

As of January 31, 2022, approximately $6.9 million of total unrecognized compensation cost was related to the ESPP that is expected to be recognized over 0.3 years.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense (excluding the expense related to the tender offers - “Note 13. Related Party Transactions”) as follows (in thousands):

	Fiscal Year Ended January 31,
	2022		2021		2020
Cost of revenue	$	1,300	$	307	$	134
Research and development	8,305		3,142		1,812
Sales and marketing	10,206		2,603		1,150
General and administrative	9,854		1,972		606
Total stock-based compensation expense, excluding tender offers	$	29,665	$	8,024	$	3,702

The tax benefit recognized in the consolidated statements of operations for stock-based compensation expense was $7.0 million for the year ended January 31, 2022 and not material for the years ended January 31, 2021 and 2020.