Equity | Equity Preferred Stock —In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 200,000,000 shares of undesignated preferred stock with a par value of $0.0001 per share and with rights and preferences, including voting rights, designated from time to time by the board of directors. Common Stock and Elimination of Dual-Class Structure —The Company has two classes of common stock authorized: Class A common stock and Class B common stock. In connection with the IPO, the Company’s amended and restated certificate of incorporation authorized the issuance of 2,500,000,000 shares of Class A common stock and 355,000,000 shares of Class B common stock. On March 1, 2021, all 169,538,568 shares of the Company's then-outstanding Class B common stock, par value $0.0001 per share, were automatically converted into the same number of shares of Class A common stock, par value $0.0001 per share, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. The shares of Class A common stock and Class B common stock were identical prior to the conversion, except with respect to voting, converting, and transfer rights. Prior to the conversion, each share of Class B common stock was entitled to cast ten votes per share on any matter submitted to a vote of the Company’s stockholders. As a result of the conversion, all former holders of shares of Class B common stock are now holders of shares of Class A common stock, which is entitled to only one vote per share on all matters subject to a stockholder vote. Class A and Class B common stock are referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise indicated. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors. Prior to the conversion, shares of Class B common stock were convertible to Class A common stock at any time at the option of the stockholder, and shares of Class B common stock would automatically convert to Class A common stock upon the following: (i) sale or transfer of such share of Class B common stock; (ii) the death of the Class B common stockholder (or nine months after the date of death if the stockholder is one of the Company’s founders); and (iii) on the final conversion date, defined as the earlier to occur following an IPO of (a) the first trading day on or after the date on which the outstanding shares of Class B common stock represented less than 10% of the then outstanding Class A and Class B common stock; (b) September 15, 2027, which is the seventh anniversary of the effectiveness of the registration statement filed in connection with the IPO; or (c) the date specified by a vote of the holders of a majority of the outstanding shares of Class B common stock, voting as a single class. In addition, on March 3, 2021, the Company filed a certificate with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the conversion. Upon the effectiveness of the certificate, the Company’s total number of authorized shares of capital stock was reduced by the retirement of 169,538,568 shares of Class B Common Stock. The Company had reserved shares of common stock for future issuance as follows: October 31, 2021 January 31, 2021 2012 Equity Incentive Plan: Options outstanding 47,781,688 64,574,656 Restricted stock units outstanding 5,034,800 7,520,474 2020 Equity Incentive Plan: Shares available for future grants 45,681,389 32,871,367 Restricted stock units outstanding 5,081,153 1,828,083 2020 Employee Stock Purchase Plan: Shares available for future grants 8,208,724 5,700,000 Total shares of common stock reserved for future issuance 111,787,754 112,494,580 In February 2020, certain third parties unaffiliated with the Company commenced an offer to purchase existing outstanding shares of the Company’s Class B common stock from certain equity holders at a price of $38.77 per share. The Company was not a party to this transaction. The transaction was completed in March 2020, and an aggregate of 8.6 million shares of the Company’s Class B common stock were transferred to these third parties. Equity Incentive Plans —In 2012, the Company’s board of directors approved the adoption of the 2012 Equity Incentive Plan (2012 Plan). The 2012 Plan provides for the grant of stock-based awards to employees, non-employee directors, and other service providers of the Company. The 2012 Plan was terminated in September 2020 in connection with the IPO but continues to govern the terms of outstanding awards that were granted prior to the termination of the 2012 Plan. No further equity awards will be granted under the 2012 Plan. With the establishment of the 2020 Equity Incentive Plan (2020 Plan) as further discussed below, upon the expiration, forfeiture, cancellation, or reacquisition of any shares common stock underlying outstanding stock-based awards granted under the 2012 Plan, an equal number of shares of Class A common stock will become available for grant under the 2020 Plan. On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock. As a result of this conversion, options and restricted stock units (RSUs) that were previously denominated in shares of Class B common stock and issued under the 2012 Plan remained unchanged, except that they represent the right to receive shares of Class A common stock. In September 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Plan, which became effective in connection with the IPO. The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, performance awards and other forms of equity compensation (collectively, equity awards). A total of 34,100,000 shares of the Company’s Class A common stock have been reserved for issuance under the 2020 Plan in addition to (i) any annual automatic evergreen increases in the number of shares of Class A common stock reserved for issuance under the 2020 Plan and (ii) upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class B common stock underlying outstanding stock awards granted under the 2012 Plan, an equal number of shares of Class A common stock, such number of shares not to exceed 78,816,888. In September 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Employee Stock Purchase Plan (2020 ESPP), which became effective in connection with the IPO. The 2020 ESPP authorizes the issuance of shares of common stock pursuant to purchase rights granted to employees. A total of 5,700,000 shares of the Company’s Class A common stock have been reserved for future issuance under the 2020 ESPP, in addition to any annual automatic evergreen increases in the number of shares of Class A common stock reserved for future issuance under the 2020 ESPP. The price at which Class A common stock is purchased under the 2020 ESPP is equal to 85% of the fair market value of a share of the Company’s Class A common stock on the first or last day of the offering period, whichever is lower. Offering periods are generally six months long and begin on March 15 and September 15 of each year, except for the first two offering periods. The initial offering period began on September 15, 2020 and ended on February 26, 2021. The second offering period began on March 1, 2021 and ended on September 14, 2021. Stock Options —Stock options granted under the 2012 Plan and the 2020 Plan (collectively, the Plans) generally vest based on continued service over four years and expire ten years from the date of grant. Certain stock options granted under the 2012 Plan are exercisable at any time following the date of grant and expire ten years from the date of grant. Stock option activity and activity regarding shares available for grant under the Plans during the nine months ended October 31, 2021 is as follows: Shares Number of Options Outstanding Weighted- Weighted-Average Remaining Contractual Life Aggregate Balance—January 31, 2021 32,871,367 64,574,656 $ 7.04 7.7 $ 17,138,896 Shares authorized 14,395,880 — Options exercised — (7,081,859) $ 5.82 Options canceled 608,303 (608,303) $ 4.70 RSUs granted (2,413,881) — RSUs forfeited 112,600 — Balance—April 30, 2021 45,574,269 56,884,494 $ 7.21 7.5 $ 12,763,483 Options exercised — (3,974,786) $ 6.15 Options canceled 659,620 (659,620) $ 8.51 RSUs granted (584,752) — RSUs forfeited 119,507 — Balance—July 31, 2021 45,768,644 52,250,088 $ 7.28 7.3 $ 13,503,560 Options exercised — (4,222,037) $ 5.85 Options canceled 246,363 (246,363) $ 8.56 RSUs granted (561,159) — RSUs forfeited 227,541 — Balance—October 31, 2021 45,681,389 47,781,688 $ 7.40 7.1 $ 16,553,557 Vested and exercisable as of October 31, 2021 24,561,457 $ 6.24 6.7 $ 8,537,609 No options were granted during the nine months ended October 31, 2021 and the weighted-average grant-date fair value of options granted during the nine months ended October 31, 2020 was $22.67. The intrinsic value of options exercised for the nine months ended October 31, 2021 and 2020 was $3.8 billion and $544.5 million, respectively. The aggregate grant-date fair value of options vested for the nine months ended October 31, 2021 and 2020 was $62.7 million and $71.0 million, respectively. Restricted Stock Awards —Restricted stock award activity during the nine months ended October 31, 2021 is as follows: Out of the Plans Number of Shares Weighted-Average Grant Date Unvested Balance—January 31, 2021 741,911 $ 2.11 Vested (90,412) $ 2.10 Unvested Balance—April 30, 2021 651,499 $ 2.11 Vested (90,414) $ 2.10 Unvested Balance—July 31, 2021 561,085 $ 2.11 Vested (90,412) $ 2.10 Unvested Balance—October 31, 2021 470,673 $ 2.11 In December 2017, the Company issued 1,250,000 shares of restricted common stock out of the 2012 Plan to an employee at $1.59 per share, payable by a promissory note. The promissory note accrued interest at the lower of 2.11% per annum or the maximum interest rate on commercial loans permissible by law and was partially secured by the underlying restricted stock. The promissory note was considered nonrecourse from an accounting standpoint, and therefore the note is not reflected in the condensed consolidated balance sheets and condensed consolidated statements of stockholders’ equity (deficit). Rather, the note and the share purchases are accounted for as stock option grants, with the related stock-based compensation measured using the Black-Scholes option-pricing model and recognized over the vesting period of five years. The associated shares are legally outstanding and included in the balance of Class B common stock outstanding in the condensed consolidated financial statements during the periods in which Class B common stock was outstanding and in the balance of Class A common stock outstanding thereafter. None of these shares of restricted common stock were considered vested before the underlying promissory note was repaid. In May and June 2020, the outstanding principal amount and all accrued interest under this promissory note of $2.1 million was repaid, and 312,500 shares of restricted common stock were unvested as of October 31, 2021. In March 2019, in connection with the acquisition of a privately-held company, the Company issued 661,635 shares of restricted common stock out of the 2012 Plan. Of the total shares issued, 215,031 shares vested on the grant date, and the remaining shares vest over four years from the grant date. The related post-acquisition stock-based compensation of $1.1 million is being amortized over the requisite service period of four years in the condensed consolidated statements of operations. As of October 31, 2021, 158,173 shares of these restricted common stock were unvested. Common Stock Subject to Repurchase —Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded in other liabilities on the condensed consolidated balance sheets. The shares issued upon the early exercise of these unvested stock option awards, which are reflected as exercises in the stock option activity table above, are considered to be legally issued and outstanding on the date of exercise. Upon termination of service, the Company may repurchase unvested shares acquired through the early exercise of stock options at a price equal to the price per share paid upon the exercise of such options. There were 66,515 and 245,633 shares subject to repurchase as of October 31, 2021 and January 31, 2021, respectively, as a result of early exercised options. As of October 31, 2021 and January 31, 2021, the liabilities for common stock subject to repurchase were $0.5 million and $1.2 million, respectively, which were recorded as other liabilities on the condensed consolidated balance sheets. Modification of Early Exercised Stock Options — In connection with the termination of a former executive officer in April 2019, certain shares of his early exercised stock options were vested immediately. The remaining early exercised stock options held by him were subject to continuous vesting through April 2020 as he continued to provide service to the Company as an advisor. The acceleration and continuation of vesting were accounted for as a modification of the terms of the original award. The incremental stock-based compensation related to this modification was $16.7 million, of which $2.7 million was recognized for the nine months ended October 31, 2020. RSUs —In March 2020, the Company began granting more RSUs than options to its employees and directors. RSUs granted prior to the IPO had both service-based and performance-based vesting conditions. The service-based vesting condition for these awards is typically satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The performance-based vesting condition is satisfied on the earlier of (i) the effective date of a registration statement of the Company filed under the Securities Act for the sale of the Company’s common stock or (ii) immediately prior to the closing of a change in control of the Company. Both events were not deemed probable until consummated, and therefore, stock-based compensation related to these RSUs remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO in September 2020, the performance-based vesting condition was satisfied, and therefore, the Company recognized cumulative stock-based compensation of $55.5 million using the accelerated attribution method for the portion of the RSU awards for which the service-based vesting condition has been fully or partially satisfied. RSUs granted after the IPO do not contain the performance-based vesting condition described above, and the related stock-based compensation is recognized on a straight-line basis over the requisite service period. RSU activity during the nine months ended October 31, 2021 was as follows: Number of Shares Weighted-Average Grant Date Unvested Balance—January 31, 2021 9,348,557 $ 125.06 Granted 2,413,881 $ 223.93 Vested (531,845) $ 40.02 Forfeited (112,600) $ 134.52 Unvested Balance—April 30, 2021 11,117,993 $ 150.50 Granted 584,752 $ 244.05 Vested (820,002) $ 78.84 Forfeited (119,507) $ 169.75 Unvested Balance—July 31, 2021 10,763,236 $ 160.83 Granted 561,159 $ 305.15 Vested (980,901) $ 99.49 Forfeited (227,541) $ 180.53 Unvested Balance—October 31, 2021 10,115,953 $ 174.34 Stock-Based Compensation — The following table summarizes the weighted-average assumptions used in estimating the fair value of stock options granted to employees and non-employees during the three and nine months ended October 31, 2020: Three Months Ended Nine Months Ended October 31, 2020 October 31, 2020 Expected term (in years) 5.9 6.0 Expected volatility 38.4 % 37.2 % Risk-free interest rate 0.4 % 1.0 % Expected dividend yield — % — % No stock options were granted during the nine months ended October 31, 2021. Expected term —For stock options considered to be “plain vanilla” options, the Company estimates the expected term based on the simplified method, which is essentially the weighted average of the vesting period and contractual term, as the Company’s historical option exercise experience does not provide a reasonable basis upon which to estimate the expected term. Expected volatility —The Company performs an analysis of using the average volatility of a peer group of representative public companies with sufficient trading history over the expected term to develop an expected volatility assumption. Risk-free interest rate —Risk-free rate is estimated based upon quoted market yields for the United States Treasury debt securities for a term consistent with the expected life of the awards in effect at the time of grant. Expected dividend yield —Because the Company has never paid and has no intention to pay cash dividends on common stock, the expected dividend yield is zero. Fair value of underlying common stock —Prior to the completion of the IPO, the board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors considered included, but were not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares. Since the completion of the IPO, the fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the New York Stock Exchange. The following table summarizes the assumptions used in estimating the fair value of employee stock purchase rights granted under the 2020 ESPP during the three and nine months ended October 31, 2021 and 2020: Three Months Ended October 31, Nine Months Ended October 31, 2021 2020 2021 2020 Expected term (in years) 0.5 0.5 0.5 0.5 Expected volatility 37.3 % 60.1 % 37.3% - 49.5% 60.1 % Risk-free interest rate 0.1 % 0.1 % 0.1 % 0.1 % Expected dividend yield — % — % — % — % Stock-based compensation included in the condensed consolidated statements of operations was as follows (in thousands): Three Months Ended October 31, Nine Months Ended October 31, 2021 2020 2021 2020 Cost of revenue $ 21,163 $ 13,226 $ 66,380 $ 15,507 Sales and marketing 43,074 39,481 141,463 49,714 Research and development 56,142 39,368 174,788 49,186 General and administrative 24,008 27,066 76,761 43,383 Stock-based compensation, net of amounts capitalized 144,387 119,141 459,392 157,790 Capitalized stock-based compensation 6,085 284 19,322 1,020 Total stock-based compensation $ 150,472 $ 119,425 $ 478,714 $ 158,810 As of October 31, 2021, total compensation cost related to unvested stock-based awards not yet recognized was $1.5 billion, which will be recognized over a weighted-average period of 3.1 years. |