Employee Incentive Plans

The Company’s equity incentive plans provide for granting stock options, restricted stock units (RSUs) and restricted stock awards to employees, consultants, officers and directors. In addition, the Company offers an Employee Stock Purchase Plan (ESPP) to eligible employees.

Stock-based compensation expense was recorded in the following cost and expense categories in the Company’s condensed consolidated statements of operations (in thousands):



	Three Months Ended April 30,
	2018		2017

	(unaudited)
Cost of revenue
Subscription	$	1,529	$	686
Professional services and other	889		469
Research and development	4,213		3,301
Sales and marketing	4,153		2,375
General and administrative	3,351		2,075
Total	$	14,135	$	8,906

Stock-based compensation expense recorded to research and development in the condensed consolidated statements of operations excludes amounts that were capitalized related to internal-use software for the three months ended April 30, 2018 and 2017. See Note 6 for further details.

Equity Incentive Plans

The Company has two equity incentive plans: the 2009 Stock Plan (2009 Plan) and the 2017 Equity Incentive Plan (2017 Plan). Upon the completion of the Company’s IPO in April 2017, the Company ceased granting equity under the 2009 Plan, and all shares that remained available for future issuance under the 2009 Plan at that time were transferred to the 2017 Plan. As of April 30, 2018, options granted under the 2009 Plan to purchase 21,910,897 shares of Class B common stock remain outstanding and options granted under the 2017 Plan to purchase 764,596 shares of Class A common stock remain outstanding.

Shares of common stock reserved for future issuance are as follows:



	As of
	April 30, 2018
	(unaudited)
Stock options and unvested RSUs outstanding	26,108,047
Available for future stock option and RSU grants	14,193,351
Available for ESPP	3,470,337
	43,771,735

Stock Options

A summary of the Company’s stock option activity and related information is as follows:



	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of January 31, 2018	24,917,045		$	7.37	7.6	$	550,173
Granted	684,500		39.21
Exercised	(2,461,383	)	4.95
Canceled	(464,669	)	8.24
Outstanding as of April 30, 2018 (unaudited)	22,675,493		$	8.58	7.7	$	776,287
As of April 30, 2018
Vested and exercisable (unaudited)	9,285,314		$	5.81	6.9	$	343,540

The weighted-average grant-date fair value of options granted was $17.21 and $5.36 during the three months ended April 30, 2018 and 2017, respectively. The total grant-date fair value of stock options vested was $5.6 million and $4.6 million during the three months ended April 30, 2018 and 2017, respectively. The intrinsic value of the options exercised, which represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option, was $81.9 million and $14.1 million for the three months ended April 30, 2018 and 2017, respectively.

As of April 30, 2018, there was a total of $58.0 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.5 years.

The Company used the Black-Scholes option pricing model to estimate the fair value of stock options granted with the following assumptions:



	Three Months Ended April 30,
	2018	2017

	(unaudited)
Expected volatility	40%	40% - 41%
Expected term (in years)	6.25	6.0 - 6.4
Risk-free interest rate	2.70%	2.06% - 2.21%
Expected dividend yield	—	—

Restricted Stock Units

A summary of the Company’s RSU activity and related information is as follows:



	Number of RSUs		Weighted- Average Grant Date Fair Value Per Share

Outstanding as of January 31, 2018	2,862,929		$	24.38
Granted	717,630		39.97
Vested	(58,825	)	17.00
Forfeited	(89,180	)	24.74
Outstanding as of April 30, 2018 (unaudited)	3,432,554		$	27.75

As of April 30, 2018, there was $81.8 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 3.4 years based on vesting under the award service conditions.

Equity Awards Issued in Connection with Business Combination

In connection with the Stormpath transaction in February 2017, the Company issued 800,000 shares of restricted common stock to Stormpath with an aggregate fair value of $8.6 million at the time of the transaction to be recognized as post combination stock-based compensation. The restricted common stock vests ratably on the first and second anniversaries of the transaction date upon achievement of the respective performance conditions, of which 400,000 shares vested during the three months ended April 30, 2018. As of April 30, 2018, there was $1.7 million of unrecognized compensation expense related to restricted common stock which is expected to be recognized over the remaining weighted average life of 0.8 years.

The Company separately entered into retention arrangements with certain employees of Stormpath and issued 598,500 restricted stock awards under the 2009 Plan with an aggregate fair value of $6.6 million at the time of the transaction with performance conditions. Additionally, the Company granted 518,900 service-based stock options under the 2009 Plan to certain Stormpath employees with an aggregate fair value of $2.5 million to vest ratably over the requisite four-year service period. Of the $9.1 million total aggregate fair value of the awards, $1.5 million was related to pre-combination service and was recognized as goodwill and a reduction to the post-combination compensation expense. The post-combination expenses for the restricted stock awards and stock options are $5.5 million and $2.1 million, respectively. The expense related to the restricted stock awards is being recognized over two or three years based on an accelerated attribution method. The expense for the stock options is being recognized ratably over the requisite service period.

During the three months ended April 30, 2018, 210,850 shares of restricted stock awards vested. As of April 30, 2018, there was $1.8 million of unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over the remaining weighted average life of 1.3 years.

As of April 30, 2018, there was $1.5 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over the remaining weighted average life of 2.2 years. The related stock options expense and activity are included within the Stock Options section above.

Employee Stock Purchase Plan

As of April 30, 2018, there was $1.5 million of unrecognized stock-based compensation expense related to ESPP that is expected to be recognized over an average vesting period of 0.2 years.