Common Stock and Stockholders' Equity (Deficit) | 10. Common Stock and Stockholders' Equity (Deficit) Preferred Stock In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 100,000,000 shares of undesignated preferred stock with a par value of $ 0.000015 per share with rights and preferences, including voting rights, designated from time to time by the board of directors. Common Stock The Company has two classes of common stock: 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 1,000,000,000 shares of Class A common stock and 200,000,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, converting, and transfer rights. Each share of Class A common stock is entitled to one vote . Each share of Class B common stock is entitled to ten votes . Class A and Class B common stock have a par value of $ 0.000015 per share, and are referred to as common stock throughout the notes to the consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors. Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. Future transfers by holders of shares of Class B common stock will generally result in those shares converting to Class A common stock (including any transfer to a broker, equity plan administrator, or other nominee regardless of whether there is a corresponding change in beneficial ownership), subject to limited exceptions, including, but not limited to, certain transfers effected for estate planning purposes, and transfers among affiliates, to the extent the transferor continues to remain an affiliate. Once converted or transferred and converted into Class A common stock, the Class B common stock may not be reissued. All the outstanding shares of our Class B common stock will convert automatically into shares of Class A common stock upon the earlier of the tenth anniversary of the Company's filing and effectiveness of the amended and restated certificate of incorporation in connection with the IPO or the affirmative vote of the holders of 66-2/3% of the voting power of outstanding Class B common stock. Following such conversion, each share of Class A common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical. Common Stock Reserved for Future Issuance The Company reserved shares of common stock for future issuance as follows: As of January 31, 2022 2021 Series Seed convertible preferred stock - 8,418,228 Series A convertible preferred stock - 23,575,316 Series B convertible preferred stock - 34,434,922 Series C convertible preferred stock - 12,625,844 Series D convertible preferred stock - 9,022,542 Series E convertible preferred stock - 6,051,132 2014 Stock Plan: Options outstanding - 15,575,113 Restricted stock units outstanding - 8,616,594 Remaining shares available for future issuance under the 2014 Plan - 637,212 2021 Equity Incentive Plan: Options outstanding 12,381,134 - Restricted stock units outstanding 10,406,294 - Remaining shares available for future issuance under the 2021 Plan 17,560,879 - 2021 Employee Stock Purchase Plan 1,900,000 - Total 42,248,307 118,956,903 Stock Awards In June 2014, the Company adopted the 2014 Stock Plan, or the 2014 Plan, pursuant to which the board of directors may grant incentive stock options to purchase shares of the Company’s common stock, nonstatutory stock options to purchase shares of the Company’s common stock, restricted stock awards, or RSAs, unrestricted stock awards, and restricted stock units, or RSUs. As of January 31, 2022, the 2014 Plan was replaced by the 2021 Equity Incentive Plan, or the 2021 Plan, and any remaining shares available for future issuance under the 2014 Plan were terminated. In November 2021, in connection with the IPO, the board of directors adopted, and the stockholders approved, the 2021 Plan as a successor to the 2014 Plan. Under the 2021 Plan: • 18,330,000 shares of Class A common stock are reserved for future issuance, which includes certain RSUs issued prior to the IPO, as well as any automatic increases in the number of shares of Class A common stock reserved for future issuance under the 2021 Plan. • 1,900,000 shares of Class A common stock are reserved for future issuance under the 2021 Employee Stock Purchase Plan, or the ESPP, as well as any automatic increases in the number of shares of Class A common stock reserved for future issuance under the ESPP. • Any shares subject to stock options, RSUs or similar awards granted under the 2014 Plan that, on or after the date that the 2014 Plan is terminated, are cancelled, expire or otherwise terminate without having been exercised or issued in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest. The equity awards available for grant for the 2014 and 2021 Plans for the periods presented are as follows: As of January 31, 2022 2021 Available at beginning of period 637,212 208,924 Awards authorized 23,051,200 5,654,722 Options granted ( 69,700 ) ( 54,500 ) Options cancelled 301,926 269,326 RSUs granted ( 7,106,578 ) ( 5,858,686 ) RSUs cancelled 961,243 417,426 Termination of the 2014 Plan ( 1,611,677 ) - Shares withheld related to net share settlement of RSUs 1,397,253 - Available at end of period 17,560,879 637,212 4,721,200 shares were authorized under the 2014 Plan and 18,330,000 shares were authorized under the 2021 Plan for fiscal 2022. Stock Options Sto ck options must be granted with an exercise price equal to the fair market value of a share of common stock at the date of grant. Stock options generally have a 10-year contractual term and vest over a four-year period starting from the date specified in each agreement. The following table summarizes stock option activity for the 2014 and 2021 Plans (aggregate intrinsic value in thousands): Options Outstanding Number of Options Outstanding Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in Years) Aggregate Intrinsic Value Balance as of January 31, 2021 15,575,113 $ 1.77 6.7 $ 372,671 Stock options granted 69,700 $ 28.34 Stock options exercised ( 2,961,753 ) $ 1.68 $ 168,258 Stock options cancelled/forfeited/expired ( 301,926 ) $ 2.12 Balance as of January 31, 2022 12,381,134 $ 1.93 5.7 $ 798,374 Exercisable as of January 31, 2022 10,536,517 $ 1.39 5.5 $ 684,903 The aggregate intrinsic value of options exercised represents the difference between the estimated fair value of common stock on the date of exercise and the exercise price of the options. Exercisable shares consist of 10,531,267 shares that are vested and 5,250 shares with an early exercise provision that are unvested as of January 31, 2022. The weighted-average grant-date fair values of option awards granted during fiscal 2022, 2021 and 2020 were $ 18.46 , $ 10.10 , and $ 3.45 per share, respectively. The total grant-date fair value of stock options vested was $ 6.5 million, $ 10.5 million and $ 4.5 million during fiscal 2022, 2021 and 2020, respectively. The total intrinsic value of options exercised during fiscal 2022, 2021 and 2020 were $ 168.3 million, $ 81.5 million and $ 19.3 million, respectively. Early Exercise of Employee Options The 2014 Plan allows for the early exercise of stock options for certain individuals as determined by the board of directors. The consideration received for the early exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability and reflected as accrued expenses and other current liabilities in the consolidated balance sheets. This liability is reclassified to additional paid-in capital and common stock as the awards vest. If a stock option is early exercised, the unvested shares may be repurchased by the Company in case of employment termination for any reason, including death and disability, at the price paid by the purchaser for such shares. In fiscal 2020 the Company issued 190,000 shares of common stock for total proceeds of $ 0.2 million and less than $ 0.1 million related to early exercised stock options. There were no early exercises in fiscal 2022 and 2021. There were no shares repurchased during any periods presented. As of January 31, 2022 and 2021, the number of shares of common stock subject to repurchas e was 5,250 and 40,052 shares with an aggregate repurchase price of de minimis. Restricted Stock Units For RSUs, the board of directors determines their vesting conditions, the period over which RSUs will vest, and the settlement. RSUs generally vest over a four-year period starting from the date specified in each agreement. The fair value of RSUs is estimated based on the fair value of the Company’s common stock on the date of grant. RSUs convert into common stock when they vest and settle. RSUs granted prior to the IPO contained both service and performance conditions. The service-based vesting condition is subject to continuous service with the Company while the performance condition was satisfied in connection with the IPO. The performance-based vesting condition was 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, the performance-based condition became probable and the Company recognized a cumulative $ 190.5 million stock-based compensation expense related to the outstanding RSUs through January 31, 2022, inclusive of the RSU modifications discussed below. The Company’s summary of RSUs activity under the 2014 Plan and the 2021 Plan is as follows: Number of Awards Weighted-Average Grant Date Fair Value Outstanding and unvested at January 31, 2021 8,616,594 $ 15.78 RSUs granted 7,106,578 $ 48.88 RSUs released ( 4,355,635 ) $ 16.32 RSUs cancelled ( 961,243 ) $ 23.33 Outstanding and unvested at January 31, 2022 10,406,294 $ 37.46 The total grant-date fair value of RSUs vested was $ 71.1 million during the year ended January 31, 2022. Restricted Stock Awards The fair value of RSAs is estimated based on the fair value of the Company’s common stock on the date of grant. RSAs convert into common stock when they vest and settle. In March 2021, the Company granted 5,314 shares of RSAs outside of the 2014 Stock Plan at a weighted-average grant date fair value of $ 28.94 to certain employees. In August 2021, the Company granted 5,250 shares of RSAs outside of the 2014 Stock Plan at a weighted-average grant date fair value of $ 47.07 to certain employees. Stock-based compensation related to RSAs was not material as of January 31, 2022. Modification On November 20, 2019, the Company amended the 2014 Stock Plan to restrict the ability of a successor entity in a change in control transaction to cancel unvested awards. The amendment modified 3,208,340 RSUs in which the Company have reassessed the original grant date fair value as of the modification date. The weighted-average grant date fair value before modification was $ 7.24 and after modification was $ 9.13 . The Company recognized approximately $ 22.0 million of stock-based compensation expense during fiscal 2022, and will recognize an additional $ 1.6 million over the remaining life of such RSUs through the fiscal year ending January 31, 2024. In November 2021, the Company modified certain RSUs by adding a vesting acceleration condition in the event of employee termination upon a change in control. The amendment modified 414,632 RSUs in which the Company have reassessed the original grant date fair value as of the modification date. The weighted-average grant-date fair value before modification was $ 23.95 and after modification was $ 80.00 . The Company recognized approximately $ 21.8 million of stock-based compensation expense during fiscal 2022, and will recognize an additional $ 11.3 million over the remaining life of such RSUs through the fiscal year ending January 31, 2025. Employee Stock Purchase Plan In December 2021, the Company adopted the 2021 Employee Stock Purchase Plan ("ESPP"), which became effective upon completion of the IPO. A total of 1,900,000 shares of Class A common stock are available for sale under the ESPP. In addition, subject to the adjustment provisions of the ESPP, the ESPP also provides for annual increases in the number of shares of Class A common stock that will be available for sale under the ESPP on the first day of each fiscal year beginning on the first day of fiscal 2023 and ending on (and inclusive of) the first day of fiscal 2032, equal to the least of: • 5,700,000 shares of Class A common stock; • 1 % of the outstanding shares of all classes of common stock as of the last day of the immediately preceding fiscal year; or • such other amount as the administrator may determine as of no later than the last day or our immediately preceding fiscal year. The ESPP provides for consecutive offering periods that will typically have a duration of approximately 24 months in length and is comprised of four purchase periods of approximately six months in length. The offering periods are scheduled to start on the first trading day on or after June 15 and December 15 of each year. The first offering period commenced on December 23, 2021 and is scheduled to end on the first trading day on or after June 15, 2022. As of January 31, 2022, no shares of common stock have been issued under the ESPP. Under our current ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lesser of (1) 85 % of the fair market value of a share of our Class A common stock on the first date of an offering or (2) 85 % of the fair market value of a share of our Class A common stock on the date of purchase. No employee may purchase shares under the ESPP at a rate in excess of $ 25,000 worth of our Class A common stock based on the fair market value per share of our Class A common stock at the beginning of an offering for each calendar year such purchase right is outstanding or 2,000 shares. The 2021 ESPP provides for, at maximum, 24 months offering periods with four offering dates, generally in June and December of each year. The fair value of the purchase rights granted under the ESPP was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: Year Ended January 31, 2022 Expected term (in years) 0.5 - 2.0 Expected volatility 44.49 % - 54.92 % Risk-free interest rate 0.16 % - 0.68 % Dividend yield 0 % Stock-Based Compensation Expense Total stock-based compensation expense recognized in the Company’s consolidated statements of operations is as follows (in thousands): Year Ended January 31, 2022 2021 2020 Cost of license $ - $ - $ - Cost of support 8,073 1,056 401 Cost of cloud-hosted services 2,482 - - Cost of professional services 3,367 308 89 Sales and marketing 64,991 11,286 2,466 Research and development 67,865 5,974 1,507 General and administrative 53,790 20,599 4,998 Stock-based compensation expenses $ 200,568 $ 39,223 $ 9,461 Capitalized stock-based compensation 3,562 - - Total stock-based compensation expense $ 204,130 $ 39,223 $ 9,461 There were no secondary transactions in fiscal 2022. In fiscal 2021 and 2020, the Company recorded $ 32.1 million and $ 1.5 million of stock-based compensation expense in the consolidated statements of operations associated with secondary stock purchase transactions, respectively. These transactions were executed among certain employees, non-employees, non-related investors and certain affiliated stockholders of the Company. The Company concluded that affiliated stockholders acquired shares from its employees at a price in excess of fair value. Accordingly, the Company recognized such excess value as stock-based compensation expense. Total stock-based compensation expense recognized in the Company’s consolidated statements of operations for these secondary transactions is as follows (in thousands): Year Ended January 31, 2022 2021 2020 Cost of license $ - $ - $ - Cost of support - 650 - Cost of cloud-hosted services - - - Cost of professional services - 210 - Sales and marketing - 8,895 - Research and development - 4,199 - General and administrative - 18,097 1,524 Stock-based compensation expense $ - $ 32,051 $ 1,524 Capitalized stock-based compensation - - - Total stock-based compensation $ - $ 32,051 $ 1,524 Total stock-based compensation expense recognized in the Company’s consolidated statements of operations exclusive of charges related to secondary sales is as follows (in thousands): Year Ended January 31, 2022 2021 2020 Cost of license $ - $ - $ - Cost of support 8,073 406 401 Cost of cloud-hosted services 2,482 - - Cost of professional services 3,367 98 89 Sales and marketing 64,991 2,391 2,466 Research and development 67,865 1,775 1,507 General and administrative 53,790 2,502 3,474 Stock-based compensation expense $ 200,568 $ 7,172 $ 7,937 Capitalized stock-based compensation 3,562 - - Total stock-based compensation $ 204,130 $ 7,172 $ 7,937 As of January 31, 2022 and 2021, total unrecognized stock-based compensation expense related to the RSUs was approximately $ 287.7 million and $ 136.0 million, respectively. This unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of approximately 2.5 years and 1.9 years, respectively. As of January 31, 2022 and 2021, unrecognized stock-based compensation expense related to outstanding unvested stock options for employees that are expected to vest was approximately $ 5.2 million and 10.3 million, respectively, which are expected to be recognized over a weighted-average period of approximately 1.6 years and 1.9 years, respectively. As of January 31, 2022, unrecognized stock-based compensation expense related to ESPP was approximately $ 21.1 million, which are expected to be recognized over a weighted-average period of approximately 1.9 years. Stock Option Valuation The Company estimates the fair value of stock options to employees on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which greatly affect the fair value of each stock option. The assumptions used to estimate the fair value of stock options granted were as follows: ` Year Ended January 31, 2022 2021 2020 Fair value of common stock $ 28.94 - $ 47.07 $ 16.52 -$ 23.37 $ 5.44 - $ 10.34 Expected volatility 49.0 % - 50.2 % 50.0 % - 51.4 % 47.3 % - 54.1 % Expected term (in years) 6.08 6.08 6.08 Risk-free interest rate 0.9 % - 1.04 % 0.5 % - 0.6 % 1.4 % - 2.6 % Dividend yield 0 % 0 % 0 % Fair Value of Common Stock —The fair value of the common stock underlying the Company’s stock options is determined by our board of directors. The board of directors, with input from management, exercises significant judgment and considers numerous objective and subjective factors to determine the fair value of common stock at each grant date. Expected Term —The expected term represents the period that the stock-based awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method as provided by the Securities and Exchange Commission. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term. Expected Volatility —Since the Company’s stock is not publicly traded, the expected volatility is based on the historical and implied volatility of similar companies whose stock or option prices are publicly available, after considering the industry, stage of life cycle, size, market capitalization, and financial leverage of the other companies. Dividend Rate —The expected dividend is assumed to be zero , as the Company has never paid dividends and has no current plans to do so. There were no option grants to nonemployees and stock-based compensation was not significant for nonemployees during the years ended January 31, 2022, 2021, and 2020. |