Equity

9 Months Ended

Oct. 31, 2022

Equity [Abstract]

Equity

10. 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

The Company had shares of common stock reserved for future issuance as follows (in thousands):

	October 31, 2022	January 31, 2022
Class A and Class B common stock
Options issued and outstanding	13,873	17,146
Shares available for issuance under Equity Incentive Plans	22,068	18,248
RSUs and PSUs issued and outstanding	7,909	3,280
Shares reserved for issuance to charitable organizations	1,636	1,636
2021 ESPP	4,451	3,271
Total	49,937	43,581

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 October 31, 2022 and January 31, 2022, there were 267,804 and 713,967 shares, respectively, of unvested options that had been early exercised and were subject to repurchase for a total liability of $2.6 million and $6.8 million, respectively. The liability associated with early exercised options is included in other long-term liabilities in the condensed 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.

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, the board of directors and stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to the Company’s 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”), restricted stock units (“RSUs”), PSUs and stock bonus awards. Pursuant to the 2021 Plan, incentive stock options may be granted only to the Company’s team members. The Company may grant all other types of awards to its team members, directors, and consultants. The Company initially reserved 13,032,289 shares of its 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 the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan increases automatically on February 1 of each of the years from 2022 through 2031.

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

	October 31, 2022	January 31, 2022
Available at beginning of period	18,248	4,796
Awards authorized	7,673	22,532
Options granted	—	(7,936)
RSUs and PSUs granted	(5,613)	(3,290)
RSUs and PSUs cancelled and forfeited	418	10
Options cancelled and forfeited	1,280	2,044
Options repurchased	62	92
Available at end of period	22,068	18,248

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.

Both Plans allow the grantees to early exercise stock options.

Stock Options, RSUs and PSUs

The following table summarizes options activity under the 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, 2022	17,146	$	11.83	8.24	$	894.8
Options granted	—	—
Options exercised	(1,993)	8.99
Options cancelled	(28)	8.78
Options forfeited	(1,252)	13.87
Balances at October 31, 2022	13,873	$	12.05	7.17	$	505.1
Options vested at October 31, 2022	7,109	$	8.80	6.42	$	281.9
Options vested and expected to vest at October 31, 2022	13,873	$	12.05	7.17	$	505.1

No options were granted during the three months ended October 31, 2022 and the weighted-average grant-date fair value per share of options granted was $12.74 for the three months ended October 31, 2021. The aggregate intrinsic value of options exercised during the three months ended October 31, 2022 and 2021 was $26.6 million and $108.6 million, respectively. The aggregate intrinsic value represents the difference between the exercise price and the fair value of the underlying common stock on the date of exercise.

No options were granted during the nine months ended October 31, 2022 and the weighted-average grant-date fair value per share of options granted was $10.81 for the nine months ended October 31, 2021. The aggregate intrinsic value of options exercised during the nine months ended October 31, 2022 and 2021 was $86.5 million and $269.9 million, respectively. The aggregate intrinsic value represents the difference between the exercise price and the fair value of the underlying common stock on the date of exercise.

As of October 31, 2022 and January 31, 2022, approximately $53.6 million and $80.3 million, respectively, of total unrecognized compensation cost was related to stock options granted, that is expected to be recognized over a weighted-average period of 2.3 years and 2.7 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.

The following table summarizes the Company’s restricted stock units activity (in thousands):

	Number of Shares (1)	Weighted- Average grant date fair value
Balances at January 31, 2022	272	$	82.11
Granted	5,248	53.15
Vested	(558)	56.66
Canceled/forfeited	(371)	56.28
Balances at October 31, 2022	4,591	$	54.10

(1) The table above does not include 3 million RSUs issued to the Company’s founder and the CEO described below.

These RSUs are grants of shares of the Company’s common stock, the vesting of which is based on the requisite service requirement. Generally, the Company’s 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.

As of October 31, 2022 and January 31, 2022, approximately $237.0 million and $21.5 million, respectively, of total unrecognized compensation cost was related to restricted stock units granted to team members other than the CEO, that is expected to be recognized over a weighted-average period of 3.3 years and 3.9 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.

In June 2022, the Company granted 0.4 million PSUs to senior members of its management team subject to revenue performance condition and service conditions. The number of awards granted represents 100% of the target goal; under the terms of the awards, the recipient may earn between 0% and 200% of the original grant. The performance condition is set to be achieved in fiscal 2025 and the service condition in the calendar year 2025. The Company recorded $1.3 million and $2.0 million of stock-based compensation expense related to PSUs during the three and nine months ended October 31, 2022, respectively. As of October 31, 2022, unrecognized stock-based compensation expense related to these PSUs was $18.0 million to be recognized over a period of 3.1 years.

CEO Performance Award

In May 2021, the Company granted 3 million RSUs tied to its Class B common stock to Mr. Sijbrandij, the Company’s co-founder and CEO, with an estimated aggregate grant date fair value of $8.8 million. The Company recorded $0.4 million and $1.2 million of stock-based compensation expense related to the CEO RSUs during the three and nine months ended October 31, 2022, respectively. The Company recorded $0.8 million of stock-based compensation expense related to the CEO RSUs during each of the three and nine months ended October 31, 2021. As of October 31, 2022, unrecognized stock-based compensation expense related to these RSUs was $6.4 million which will be recognized over the remaining derived service period of the respective tranches which ranges from 2 to 7 years.

2021 Employee Stock Purchase Plan (“ESPP”)

In September 2021, the Company’s board of directors and its stockholders approved the 2021 Employee Stock Purchase Plan (“ESPP”) to enable eligible team members to purchase shares of the Company’s 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 IPO date or purchase date, whichever is lower. The 2021 ESPP also provides up to a 27-month look-back period with four purchase dates in May and November of each year, and the first purchase occurred in May 2022.

If the closing price of the Company’s Class A common stock on the first day of the current offering period is higher than the price on the last day of any applicable purchase period, the ESPP requires the price to be reset based on the lower fair market value and the offering period to be rolled over for a new period of 24 months. This reset and rollover was triggered on the May 31, 2022 purchase date. The original offering period commencing on the IPO date through November 30, 2023 was modified to a new offering period commencing June 1, 2022 through May 31, 2024 and the ESPP price was reset based on the closing price of the Company’s Class A common stock on May 31, 2022. In accordance with ASC 718, Stock-Based Compensation, the modification in respect of the reset of the ESPP price and rollover resulted in an incremental charge of stock-based compensation expense of $1.0 million and $1.7 million during the three and nine months ended October 31, 2022, respectively. The remaining modification charge of $7.7 million will be recognized over the new offering period.

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

	Nine Months Ended October 31,
	2022
Risk-free interest rate	1.62% - 2.63%
Volatility	44.95% - 52.76%
Expected term (in years)	0.5 - 2.0
Dividend yield	—%

The Company recorded $5.3 million and $19.4 million of stock-based compensation expense related to the ESPP during the three and nine months ended October 31, 2022, respectively. As of October 31, 2022, approximately $24.9 million of total unrecognized compensation cost was related to the ESPP that is expected to be recognized over 1.6 years.

In May 2022, the Company issued 0.3 million shares of Class A common stock to team members through the ESPP.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense as follows (in thousands):

	Three Months Ended October 31,				Nine Months Ended October 31,
	2022		2021		2022		2021
Cost of revenue	$	1,248	$	331	$	3,623	$	722
Research and development	10,030		2,147		26,405		4,653
Sales and marketing	12,905		2,562		34,807		5,688
General and administrative	9,525		3,539		24,091		6,179
Total stock-based compensation expense (1)	$	33,708	$	8,579	$	88,926	$	17,242

(1) The table above includes stock-based compensation of JiHu. Refer to “Note 11. Joint Venture and Equity Method Investment” for further discussion.

The corporate income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation expense was $2.6 million and $5.8 million for the three and nine months ended October 31, 2022, respectively, and not material for the three and nine months ended October 31, 2021.