Stockholders Equity | Stockholders’ Equity Convertible Preferred Stock Prior to the completion of the Direct Listing, all of the 373.4 million shares of convertible preferred stock converted into an equivalent number of shares of Class B common stock. At January 31, 2019, convertible preferred stock consisted of the following (in thousands): Shares Net Liquidation preference Authorized Outstanding Series A 84,751 84,751 $ 8,011 $ 8,060 Series B 43,320 43,320 10,674 10,700 Series C 64,805 64,805 42,678 42,750 Series D 47,059 42,490 108,266 108,350 Series D-1 1,235 1,235 2,561 3,149 Series E 26,787 22,602 134,832 135,000 Series E-1 6,047 6,047 37,940 37,950 Series F 19,867 19,867 154,957 155,000 Series F-1 6,793 6,793 52,940 53,000 Series G 24,718 24,718 229,648 230,000 Series G-1 2,149 2,149 20,000 20,000 Series G-2 17,241 17,241 150,000 150,000 Series G-3 1,465 1,465 12,714 8,700 Series H 35,150 33,470 398,082 398,468 Series H-1 9,202 2,419 28,798 28,798 Total 390,589 373,372 $ 1,392,101 $ 1,389,925 Preferred Stock The Company’s board of directors has the authority, without further action by the Company’s stockholders, to issue up to 100,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by the board of directors. Common Stock On June 7, 2019, the Company amended and restated its certificate of incorporation to authorize 5,000,000,000 shares of Class A common stock and 700,000,000 shares of Class B common stock. Holders of Class A common stock and Class B common stock are entitled to dividends on a pro rata basis, when, as, and if declared by the Company’s board of directors, subject to preferences that may apply to any shares of preferred stock outstanding at the time. Holders of Class A common stock are entitled to one vote per share, and holders of Class B common stock are entitled to ten votes per share. Upon a liquidation, dissolution or winding-up of the Company, any distribution of proceeds to common stockholders will be made on a pro rata basis to the holders of Class A common stock, Class B common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock. Shares of Class B common stock will automatically convert into shares of Class A common stock upon a sale or transfer (other than with respect to certain estate planning and other transfers). All shares of Class B common stock outstanding in June 2029 will automatically convert into shares of Class A common stock. Class A common stock and Class B common stock is not redeemable at the option of the holder. The Company had reserved shares of common stock for future issuance as follows (in thousands): As of January 31, 2020 Stock options outstanding 8,425 Restricted stock units outstanding 42,002 Shares available for future grants 59,200 Shares available for ESPP 8,664 Total 118,291 Equity Incentive Plan The Company maintains two equity incentive plans: the 2009 Plan and the 2019 Plan. Upon the completion of the Direct Listing, the Company adopted the 2019 Plan and terminated the 2009 Plan with all shares that remained available for future issuance at the time canceled. The 2019 Plan is a successor to and continuation of the 2009 Plan that provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other forms of awards. The Company initially reserved 60.2 million shares of Class A common stock for the issuance of awards under the 2019 Plan. These available shares automatically increase each February 1, beginning on February 1, 2020, by 5% of the number of shares of the Company’s Class A and Class B common stock outstanding on the immediately preceding January 31, or such lesser number of shares as determined by the Company’s board of directors or compensation committee. Stock Options A summary of stock option activity under the 2009 Plan and 2019 Plan and related information is as follows (in thousands, except years and per share data): Number of stock options outstanding Weighted-average exercise price per share Weighted-average remaining contractual term (In years) Aggregate intrinsic value Outstanding at January 31, 2019 18,406 $ 0.94 6.12 $ 177,012 Granted 3,663 10.58 Exercised (13,268 ) 1.04 Canceled (376 ) 7.67 Outstanding at January 31, 2020 8,425 $ 4.68 6.27 $ 135,224 Stock options vested and exercisable at January 31, 2020 5,342 $ 1.44 4.96 $ 103,049 Stock options vested and expected to vest at January 31, 2020 8,425 $ 4.68 6.27 $ 135,224 The total grant-date fair value of stock options granted in the years ended January 31, 2020 , 2019 , and 2018 was $21.4 million , $0 , and $0.1 million , respectively. The total intrinsic value of stock options exercised in the years ended January 31, 2020 , 2019 , and 2018 , was $393.3 million , $30.0 million , and $13.6 million , respectively. As of January 31, 2020 , there was $16.7 million of total unrecognized stock-based compensation related to outstanding stock options, which will be recognized on a straight-line basis over a weighted average period of 4.8 years . RSUs and RSAs The fair value of RSUs and RSAs are determined using the fair value of the Company’s common stock on the date of grant. A summary of RSUs and RSAs activity under the 2009 Plan and 2019 Plan is as follows (in thousands, except per share data): Restricted stock units Restricted stock awards Number of shares Weighted-average grant date fair value (per share) Number of shares Weighted-average grant date fair value (per share) Unvested at January 31, 2019 63,114 $ 4.87 2,289 $ 7.23 Granted 23,804 18.93 505 13.60 Released (40,318 ) 4.84 (1,205 ) 7.74 Canceled (4,598 ) 8.45 (10 ) 2.37 Unvested at January 31, 2020 42,002 $ 12.48 1,579 $ 8.91 The weighted-average estimated fair value of RSUs granted in the year ended January 31, 2019 and 2018 was $7.02 and $4.15 per share, respectively. The weighted-average estimated fair value of RSAs granted in the year ended January 31, 2019 was $7.86 per share. No RSAs were granted in the year ended January 31, 2018. As of January 31, 2020 , the Company had $313.6 million of unrecognized stock-based compensation related to RSUs, which will be recognized over the weighted average remaining requisite service period of 1.5 years . As of January 31, 2020 , the Company had $13.5 million of unrecognized stock-based compensation related to RSAs, which will be recognized over the weighted average remaining requisite service period of 3.7 years . 2019 Employee Stock Purchase Plan The Company’s 2019 ESPP became effective on June 6, 2019. A total of 9.0 million shares of the Company’s Class A common stock were reserved for issuance under the 2019 ESPP. These available shares automatically increase each February 1, beginning on February 1, 2020, by the lesser of 6.0 million shares of the Class A common stock, 1% of the number of shares of the Company’s Class A and Class B common stock issued and outstanding on the immediately preceding January 31, or such lesser number of shares as determined by the Company’s compensation committee. The 2019 ESPP allows eligible employees to purchase shares of the Company’s Class A common stock at a discount of 15% through payroll deductions of their eligible compensation, subject to any plan limitations. Except for the first offering period from the date of the Direct Listing, the 2019 ESPP provides for separate six-month offering periods beginning each October 10 and April 10. On each purchase date, eligible employees will purchase the Company’s Class A common stock at a price per share equal to 85% of the lesser of (i) the fair market value of the Company’s Class A common stock on the offering date or (ii) the fair market value of the Company’s Class A common stock on the purchase date. For the year ended January 31, 2020 , 0.3 million shares of Class A common stock were issued under the 2019 ESPP. The Company selected the Black-Scholes option-pricing model as the method for determining the estimated fair value for the Company’s 2019 ESPP. As of January 31, 2020 , total unrecognized compensation cost related to the 2019 ESPP was $1.7 million which will be amortized over a weighted average period of 0.2 years . Tender Offers and Repurchases In connection with the Series G and G-1 convertible preferred stock financing, the Company facilitated a tender offer for all vested and outstanding shares of Class B common stock and all outstanding series of convertible preferred stock. In November 2017, the Company facilitated the sale of an aggregate of 17.9 million shares of vested and outstanding Class B common stock, Series A convertible preferred stock, Series D convertible preferred stock, Series D-1 convertible preferred stock and Series E convertible preferred stock from its existing or former employees and investors at a per share price of $8.37 , representing a 10% discount to the Series G and G-1 issuance price, for a total gross sale of $150.0 million . Following the close of the November 2017 tender offer, the Company repurchased an additional 0.8 million shares of Class B common stock from one of the Company’s co-founders at the same price per share of $8.37 for a total gross sale of $6.6 million . At the time of the tender offers, the fair value of the Company’s Class B common stock was $4.24 per share. For shares of Class B common stock repurchased from both current and former employees, the Company recorded compensation expense of $38.9 million related to the excess of the selling price per share of Class B common stock over the fair value of the tendered shares. In addition, the Company recorded deemed dividends of $40.9 million as a reduction to stockholder’s deficit in relation to the selling price per share of Class B common stock and convertible preferred stock paid to existing investors in excess of the original issuance price paid by investors of the shares tendered. Upon close of the tender offer, the Company retired the repurchased shares and subsequently issued the same number of shares in Series G-2 convertible preferred stock and Series G-3 convertible preferred stock to the lead investor of the Series G convertible preferred stock financing. In April and June 2017, the Company repurchased 0.1 million shares of common stock from former employees at a purchase price of $7.41 per share. In December 2017, the Company repurchased a combined 0.1 million shares of Class B common stock from one current and one former employee at a purchase price of $8.37 per share. For all the repurchased shares of common stock, the purchase price per share represented an excess to the fair value of the Company’s fair value of common stock at the time of each transaction. In total, the Company recorded $0.5 million of compensation expense and retired all repurchased shares of common stock as of January 31, 2018. A summary of the stock-based compensation related to the tender offers and repurchases, recorded in the accompanying consolidated statements of operations is as follows (in thousands): Year ended January 31, 2020 2019 2018 Cost of revenue $ — $ — $ 252 Research and development — — 30,674 Sales and marketing — — 6,549 General and administrative — — 1,899 Total $ — $ — $ 39,374 Stock Transfers During the years ended January 31, 2019 and 2020, certain of the Company’s existing investors, or investors to whom the Company waived its right of first refusal and transfer restrictions with respect to proposed transfers of outstanding common stock, acquired outstanding common stock from current or former employees of the Company for a purchase price greater than the fair value at the time of the transactions. In connection with these stock transfers, the Company waived its right of first refusal and other transfer restrictions applicable to such shares. As a result, the Company recorded stock-based compensation for the difference between the price paid and the fair value on the date of the transaction. A summary of the stock-based compensation related to the stock transfers recorded in the accompanying consolidated statements of operations is as follows (in thousands): Year ended January 31, 2020 2019 2018 Cost of revenue $ — $ 533 $ — Research and development — 6,228 — Sales and marketing — 1,707 — General and administrative — 6,353 — Total $ — $ 14,821 $ — Stock-Based Compensation A summary of the stock-based compensation excluding tender offers and stock transfers recorded in the accompanying consolidated statements of operations is as follows (in thousands): Year ended January 31, 2020 2019 2018 Cost of revenue $ 16,013 $ 199 $ 239 Research and development 226,507 3,720 4,586 Sales and marketing 98,797 970 1,495 General and administrative 85,207 3,422 2,389 Total $ 426,524 $ 8,311 $ 8,709 The fair value of stock options granted to employees is estimated on the date of grant using the Black-Scholes option valuation model. This stock-based compensation expense valuation model requires the Company to make assumptions and judgments regarding the variables used in the calculation. These variables include the expected term (weighted average period of time that the stock options granted are expected to be outstanding), the expected volatility of the Company’s common stock, expected risk-free interest rate and expected dividends. To the extent actual results differ from the estimates, the difference is recorded as a cumulative adjustment in the period estimates are revised. The Company accounts for forfeitures as they occur. The Company uses the simplified calculation of expected term, as the Company does not have sufficient historical data to use any other method to estimate expected term. Expected volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The expected risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The expected dividend yield is 0% as the Company has not paid, and does not expect to pay, cash dividends. The following assumptions used in the valuation of stock options and ESPP: Stock Option ESPP Year ended January 31, Year ended 2020 2018 January 31, 2020 Expected Term 6.1 - 6.5 years 6.05 years 0.3 - 0.5 years Expected volatility 43% - 44% 41% 40% - 42% Risk-free interest rate 2.33% - 2.52% 1.62% 1.68% - 2.08% Dividend yield —% —% —% Fair value of common stock on grant date $11.67 - $19.36 $4.24 $23.82 - $38.62 There were no stock options granted to employees during the year ended January 31, 2019. |