EQUITY AWARD PLANS | EQUITY INCENTIVE PLANS Stock Plans We have three equity incentive plans, the 2010 Stock Plan ("2010 Plan"), 2011 Stock Plan ("2011 Plan") and 2016 Equity Incentive Plan ("2016 Plan"). Our stockholders approved the 2016 Plan in March 2016 and it became effective in connection with our initial public offering ("IPO"). As a result, at the time of the IPO, we ceased granting additional stock awards under the 2010 Plan and 2011 Plan and both plans were terminated. Any outstanding stock awards under the 2010 Plan and 2011 Plan will remain outstanding, subject to the terms of the applicable plan and award agreements, until such shares are issued under those stock awards, by exercise of stock options or settlement of restricted stock units ("RSUs"), or until those stock awards become vested or expired by their terms. Under the 2016 Plan, we may grant incentive stock options ("ISOs"), non-statutory stock options ("NSOs"), restricted stock, RSUs and stock appreciation rights to employees, directors and consultants. We initially reserved 22,400,000 shares of our Class A common stock for issuance under the 2016 Plan. The number of shares of Class A common stock available for issuance under the 2016 Plan will also include an annual increase on the first day of each fiscal year, beginning in fiscal 2018, equal to the lesser of: 18,000,000 shares, 5% of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year, or such other amount as may be determined by the Board. Accordingly, on August 1, 2017 and 2018, the number of shares of Class A common stock available for issuance under the 2016 Plan increased by 7,731,826 and 8,642,904 shares, respectively, pursuant to these provisions. As of April 30, 2019 , we had reserved a total of 46,199,635 shares for the issuance of equity awards under the Stock Plans, of which 13,827,893 shares were still available for grant. Restricted Stock Units Performance RSUs — We grant RSUs that have both service and performance conditions to our executives and employees ("Performance RSUs"). Vesting of Performance RSUs is subject to continuous service and the satisfaction of certain performance targets. While we recognize cumulative stock-based compensation expense for the portion of the awards for which both the service condition has been satisfied and it is probable that the performance conditions will be met, the actual vesting and settlement of Performance RSUs are subject to the performance conditions actually being met. Market Stock Units — In October 2018, the Compensation Committee of our Board of Directors approved the grant of 100,000 RSUs subject to certain market conditions ("MSUs") to our Chief Executive Officer ("CEO"), with a weighted average grant date fair value per unit of $25.16 . The MSUs will vest based upon the achievement of an average stock price of $80 over a performance period of approximately 4.5 years (the “Performance Period”), subject to his continuous service on each vesting date. The average stock price is calculated based on the average closing price of one share of our Class A common stock, as reported on the NASDAQ Stock Market during the 180-day period ending on the last trading day prior to each measurement date (as applicable, the “Average Stock Price”). The Average Stock Price is measured once per quarter during the Performance Period, and: • If the Average Stock Price on any given quarterly measurement date does not equal or exceed $80 , then none of the MSUs will vest that quarter, and any unvested MSUs will carry over to the next quarter (the “Carryover MSUs”); • If the Average Stock Price on any given quarterly measurement date equals or exceeds $80 , then 1/18th of the MSUs plus the applicable Carryover MSUs, if any, would vest; and/or • If the Average Stock Price never equals or exceeds $80 during the Performance Period, the MSUs would terminate at the end of the Performance Period. We used a Monte Carlo simulation to calculate the fair value of the award on the grant date. A Monte Carlo simulation requires the use of various assumptions, including the stock price volatility and risk free interest rate as of the valuation date corresponding to the length of time remaining in the performance period and expected dividend yield. We recognize stock-based compensation expense related to these MSUs using the graded vesting attribution method over the Performance Period. As of April 30, 2019 , 100,000 MSUs remained outstanding. Below is a summary of RSU activity, including MSUs, under the Stock Plans: Number of Grant Date Fair Value per Share Outstanding at July 31, 2018 23,597,499 $ 31.20 Granted 8,445,399 $ 47.63 Vested (6,382,260 ) $ 28.07 Canceled/forfeited (2,426,308 ) $ 35.03 Outstanding at April 30, 2019 23,234,330 $ 37.63 Stock Options We did not grant any stock options during the nine months ended April 30, 2019 . A total of 2,194,303 stock options were exercised during the nine months ended April 30, 2019 , with an average exercise price per share of $4.64 . As of April 30, 2019 , 9,103,232 stock options, with a weighted average exercise price of $5.22 per share, a weighted average remaining contractual life of 4.9 years and an aggregate intrinsic value of $345.7 million , remained outstanding. Employee Stock Purchase Plan In December 2015, the Board adopted the 2016 Employee Stock Purchase Plan ("2016 ESPP"), which was subsequently amended in January 2016 and September 2016 and approved by our stockholders in March 2016. The 2016 ESPP became effective in connection with our IPO. A total of 3,800,000 shares of Class A common stock were initially reserved for issuance under the 2016 ESPP. The number of shares of Class A common stock available for sale under the 2016 ESPP also includes an annual increase on the first day of each fiscal year, beginning in fiscal 2018, equal to the lesser of: 3,800,000 shares, 1% of the outstanding shares of all classes of common stock as of the last day of our immediately preceding fiscal year, or such other amount as may be determined by the Board. Accordingly, on August 1, 2017 and 2018, the number of shares of Class A common stock available for issuance under 2016 ESPP increased by 1,546,365 and 1,728,580 shares, respectively, pursuant to these provisions. The 2016 ESPP allows eligible employees to purchase shares of our Class A common stock at a discount through payroll deductions of up to 15% of eligible compensation, subject to caps of $25,000 in any calendar year and 1,000 shares on any purchase date. The 2016 ESPP provides for 12 -month offering periods, generally beginning in March and September of each year, and each offering period consists of two six-month purchase periods. On each purchase date, participating employees will purchase Class A common stock at a price per share equal to 85% of the lesser of the fair market value of our Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each purchase period in the applicable offering period. If the stock price of our Class A common stock on any purchase date in an offering period is lower than the stock price on the enrollment date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new offering period. During the nine months ended April 30, 2019 , 2,008,082 shares of common stock were purchased under the 2016 ESPP for an aggregate amount of $57.2 million . As of April 30, 2019 , 1,402,959 shares were available for future issuance under the 2016 ESPP. We use the Black-Scholes option pricing model to determine the fair value of shares purchased under the 2016 ESPP with the following weighted average assumptions on the date of grant: Nine Months Ended 2018 2019 Expected term (in years) 0.75 0.84 Risk-free interest rate 1.4 % 2.5 % Volatility 49.8 % 69.0 % Dividend yield — % — % Stock-Based Compensation Total stock-based compensation expense recognized in the condensed consolidated statements of operations is as follows: Three Months Ended Nine Months Ended 2018 2019 2018 2019 (in thousands) Cost of revenue: Product $ 634 $ 953 $ 1,888 $ 2,523 Support, entitlements and other services 1,951 4,542 6,156 11,072 Sales and marketing 18,051 35,257 47,759 81,325 Research and development 16,474 42,265 49,039 107,953 General and administrative 7,836 11,815 17,630 30,449 Total stock-based compensation expense $ 44,946 $ 94,832 $ 122,472 $ 233,322 As of April 30, 2019 , unrecognized stock-based compensation expense related to outstanding stock awards was approximately $791.3 million and is expected to be recognized over a weighted average period of approximately 2.5 years |