Common Stock and Stockholders' Equity | Common Stock and Stockholders’ Equity Equity Incentive Plans The Company has two equity incentive plans: the 2010 Stock Plan (the “2010 Plan”) and the 2019 Equity Incentive Plan (the “2019 Plan”, collectively the “Stock Plans”). Upon completion of the Company’s initial public offering (“IPO”) in April 2019, the Company ceased granting awards under the 2010 Plan, and all shares that remained available for future issuance under the 2010 Plan at that time were transferred to the 2019 Plan. The 2019 Plan superseded and replaced the 2010 Plan. As of April 30, 2023 and January 31, 2023, the Company was authorized to grant up to 33,695,949 shares and 28,881,327 shares of common stock, respectively, under the Stock Plans. The Company currently uses authorized and unissued shares to satisfy stock award exercises and settlement of Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”). As of April 30, 2023 and January 31, 2023, there were 16,708,400 shares and 13,581,239 shares available for future issuance under the Stock Plans, respectively. Shares of common stock reserved for future issuance are as follows: April 30, 2023 Outstanding stock options and unvested RSUs and PSUs 16,268,721 Available for future stock option, RSU, and PSU grants 16,708,400 Available for Employee Stock Purchase Plan (“ESPP”) 3,883,009 Total common stock reserved at April 30, 2023 36,860,130 Stock Option Activity Stock option activity is as follows: Number of Weighted Weighted Aggregate (in thousands) Outstanding at January 31, 2023 6,150,981 $ 10.61 5.3 years $ 117,986 Granted — $ — Exercised (519,852) $ 8.33 Canceled (18,589) $ 23.58 Outstanding at April 30, 2023 5,612,540 $ 10.78 5.1 years $ 108,231 Vested as of April 30, 2023 5,160,003 $ 9.57 5.0 years $ 105,736 No stock options were granted during the three months ended April 30, 2023. Stock options granted during the three months ended April 30, 2022 had a weighted average grant date fair value of $16.46 per share. The aggregate intrinsic value of stock options exercised during the three months ended April 30, 2023 and 2022 was $12.1 million and $21.3 million, respectively. The intrinsic value for options exercised is the difference between the market value of the stock and the exercise price of the stock option at the date of exercise. As of April 30, 2023, there was approximately $5.8 million of total unrecognized compensation cost related to unvested stock options granted under the Stock Plans, which will be recognized over a weighted average period of 1.6 years. Restricted Stock Units A summary of the Company’s RSU activity and related information is as follows: Number of RSUs Weighted Outstanding at January 31, 2023 8,012,482 $ 32.55 Granted 2,897,187 $ 34.98 Vested (390,437) $ 30.77 Forfeited or canceled (1,094,033) $ 32.01 Outstanding at April 30, 2023 9,425,199 $ 33.44 The fair value of RSUs is based on the fair value of the underlying shares on the date of grant. The Company accounts for forfeitures as they occur. As of April 30, 2023, there was $295.0 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.7 years based on vesting under the award service conditions. Performance and Market Stock Units The Company grants PSUs to certain employees of the Company for which the ultimate number of units that will vest are determined based on the achievement of market and/or performance conditions at the end of the stated performance period. In April 2023, the Company granted shares of PSUs to certain employees of the Company, which are to vest based on the level of achievement of a Company target related to PagerDuty’s operating plan and the relative growth of the per share price of the Company’s common stock as compared to the S&P Software & Services Select Index over the one-year performance period. The PSUs vest over a three During the three months ended April 30, 2023, the compensation committee of the Board certified the results of PagerDuty’s operating plan for the fiscal year ended January 31, 2023. Based on the results, the PSUs granted in April 2022 (“2022 PSU Awards”) were cancelled as the target was not met. A summary of the Company’s PSU activity and related information is as follows: Number of PSUs Weighted Outstanding at January 31, 2023 825,058 $ 33.27 Granted (1) 594,290 $ 34.98 Vested (5,582) $ 41.17 Forfeited or canceled (78,091) $ 35.36 Performance adjustment for 2022 PSU Awards (698,983) $ 29.22 Outstanding at April 30, 2023 636,692 $ 35.39 (1) This amount represents awards granted at 100% attainment. As of April 30, 2023, total unrecognized stock-based compensation cost related to PSUs was $23.0 million. This unrecognized stock-based compensation cost is expected to be recognized using the accelerated attribution method over a weighted-average period of approximately 1.7 years. Employee Stock Purchase Plan The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions over 24-month offering periods beginning June 15 and December 15 of each year, with each offering period consisting of four six-month purchase periods. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock as of the beginning of the offering period or (2) the fair market value of the Company’s common stock on the purchase date, as defined in the ESPP. During the three months ended April 30, 2023 and 2022, the Company recognized $1.8 million and $1.1 million, respectively, of stock-based compensation expense related to the ESPP. During the three months ended April 30, 2023 and 2022, the Company withheld $3.7 million and $5.7 million, respectively, in contributions from employees. During the three months ended April 30, 2023 and 2022 there were no purchases related to the ESPP. Stock-Based Compensation Stock-based compensation expense included in the Company’s condensed consolidated statements of operations is as follows: Three Months Ended April 30, 2023 2022 (in thousands) Cost of revenue $ 1,876 $ 1,224 Research and development 10,101 8,675 Sales and marketing 5,951 6,381 General and administrative 9,617 8,629 Total $ 27,545 $ 24,909 |