EQUITY AWARD PLANS

Stock Plans—In June 2010, we adopted the 2010 Stock Plan, or the 2010 Plan, and in December 2011, we adopted the 2011 Stock Plan, or 2011 Plan. In December 2015, the Board adopted the 2016 Equity Incentive Plan, or the 2016 Plan, and together with the 2010 Plan and 2011 Plan, the Stock Plans, which was amended in September 2016. Our stockholders approved the 2016 Plan in March 2016 and it became effective in connection with our IPO in October 2016. As a result, upon the IPO, we ceased granting additional stock awards under the 2010 Plan and 2011 Plan and the 2010 Plan and 2011 Plan 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 RSUs, or until those stock awards become vested or expired by their terms. Under the 2016 Plan, we may grant incentive stock options, or ISOs, non-statutory stock options, or NSOs, restricted stock, or RS, restricted stock units, or RSUs, and stock appreciation rights, or SARs, to employees, directors and consultants. We have 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 also includes an annual increase on the first day of each fiscal year beginning in fiscal year 2018, equal to the lesser of: 18,000,000 shares, 5% of the outstanding shares of 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, the number of shares of Class A common stock available for issuance under our 2016 Plan increased by 7,731,826 shares pursuant to these provisions. As of October 31, 2017, we had reserved a total of 56,636,515 shares for the issuance of equity awards under the Stock Plans, of which 22,201,692 shares were still available for grant.

Restricted Stock Units

Performance RSUs. We granted RSUs that contain both service and performance conditions to our executives and employees, which we refer to as Performance RSUs. Vesting of the Performance RSUs is subject to continuous service with us and satisfaction of certain of our liquidity events, including the expiration of a lock-up period established in connection with the IPO, or both certain liquidity events and specified performance targets. While we recognize cumulative stock-based compensation expense for the portion of the awards for which the service condition has been satisfied when it is probable that the performance conditions will be met, vesting and settlement of the Performance RSUs are subject to the performance conditions actually being met. During the three months ended October 31, 2016, we began to recognize Performance RSUs with liquidity event performance conditions as the satisfaction of the performance conditions for vesting became probable.

The summary of RSU activity under the Stock Plans is as follows:



	Number of Shares		Grant Date Fair Value per Share
Outstanding—July 31, 2017	17,376,090		$	18.85
Granted	1,553,392		$	23.72
Released	(1,412,978	)	$	16.04
Canceled/forfeited	(771,957	)	$	23.58
Outstanding—October 31, 2017	16,744,547		$	19.32

Subsequent to October 31, 2017, we granted 7,311,448 RSUs to our employees with a weighted-average grant date fair value of $34.39 per share.

Stock Options—We did not grant any stock options during the three months ended October 31, 2017. A total of 2,580,224 stock options were exercised during the three months ended October 31, 2017 for an average exercise price of $3.09. As of October 31, 2017, 17,656,096 stock options remained outstanding.

Employee Stock Purchase Plan—In December 2015, the Board adopted the 2016 Employee Stock Purchase Plan, which was subsequently amended in January 2016 and September 2016 and approved by our stockholders in March 2016, or the 2016 ESPP. 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 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, the number of shares of Class A common stock available for issuance under 2016 ESPP increased by 1,546,365 shares 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 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 and (2) 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.

For the three months ended October 31, 2017, 1,261,104 shares of common stock were purchased for an aggregate amount of $17.4 million. As of October 31, 2017, 2,839,207 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:



	Three Months Ended October 31,
	2016		2017
Expected term (in years)	0.75		0.75
Risk-free interest rate	0.6	%	1.25	%
Volatility	50.6	%	50.2	%
Dividend yield	—	%	—	%

Stock-Based Compensation —Total stock-based compensation expense recognized for stock awards in the consolidated statements of operations is as follows (in thousands):



	Three Months Ended October 31,
	2016		2017
	(in thousands)
Cost of revenue:
Product	$	966	$	570
Support and other services	3,350		2,072
Sales and marketing	33,891		13,766
Research and development	34,026		15,542
General and administrative	18,495		3,565
Total stock-based compensation expense	$	90,728	$	35,515

Stock-based compensation expense for the three months ended October 31, 2016 included cumulative stock-compensation expense related to stock awards with performance conditions, which vesting was deemed probable in the first quarter of fiscal 2017 upon the successful completion of our IPO. Prior to fiscal 2017, no expense was recognized related to these stock awards with performance conditions as vesting was not deemed probable. The cumulative stock-based compensation expense recorded in the first quarter of fiscal 2017 was for the portion of the awards for which the relevant service condition had been satisfied and we have continued to recognize the remaining expense over the remaining service period. Stock-based compensation expense related to stock awards without performance conditions is recognized on a straight-line basis over the requisite service period.

As of October 31, 2017, unrecognized stock-based compensation expense related to the outstanding stock awards was approximately $272.6 million and is expected to be recognized over a weighted-average period of approximately 2.2 years.