Stock-Based Compensation Expense and Shareholders' Equity

3 Months Ended

Oct. 31, 2022

Stockholders' Equity and Stock-based Compensation [Abstract]

Stock-Based Compensation Expense and Shareholders' Equity

Stock-Based Compensation Expense and Shareholders’ Equity

Stock-Based Compensation Expense

Stock-based compensation expense related to stock options and Stock Awards is included in the Company’s condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended October 31,
	2022		2021
Stock-based compensation expense	$	35,249	$	32,533
Net impact of deferred stock-based compensation	(153)		(293)
Total stock-based compensation expense, net	$	35,096	$	32,240
Stock-based compensation expense is included in the following categories:
Cost of subscription and support revenue	$	3,468	$	3,030
Cost of license revenue	147		182
Cost of services revenue	5,349		5,189
Research and development	9,291		7,997
Sales and marketing	6,887		7,113
General and administrative	9,954		8,729
Total stock-based compensation expense	$	35,096	$	32,240

Total unrecognized stock-based compensation expense related to the Company’s stock options and Stock Awards as of October 31, 2022 is as follows:


	Unrecognized Expense (in thousands)		Weighted Average Expected Recognition Period (in years)
Stock Options	$	3,569	1.8
Stock Awards	352,209		3.0
Total unrecognized stock-based compensation expense	$	355,778

Stock Awards

A summary of Stock Awards activity under the Company’s equity incentive plans is as follows:


	Stock Awards Outstanding
	Number of Stock Awards Outstanding	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)(1)
Balance as of July 31, 2022	2,785,353	$	110.47	$	216,478
Granted	1,991,973	$	66.03
Released	(373,380)	$	112.50	$	24,981
Canceled	(100,911)	$	106.40
Balance as of October 31, 2022	4,303,035	$	89.81	$	255,643
Expected to vest as of October 31, 2022	4,303,035	$	89.81	$	255,643

(1) Aggregate intrinsic value at each period end represents the total market value of Stock Awards at the Company’s closing stock price of $59.41 and $77.72 on October 31, 2022 and July 31, 2022, respectively. Aggregate intrinsic value for released Stock Awards represents the total market value of released Stock Awards at date of release.

Stock Options

A summary of stock option activity under the Company’s equity incentive plans is as follows:


	Stock Options Outstanding
	Number of Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value(1)
				(in years)	(in thousands)
Balance as of July 31, 2022	75,706	$	61.93	8.7	$	1,196
Granted	91,350	$	68.22
Exercised	—	$	—		$	—
Canceled	—	$	—
Balance as of October 31, 2022	167,056	$	65.37	9.1	$	647
Vested and expected to vest as of October 31, 2022	167,056	$	65.37	9.1	$	647
Exercisable as of October 31, 2022	14,806	$	21.85	3.3	$	556

(1) Aggregate intrinsic value at each period end represents the difference between the Company’s closing stock price of $59.41 and $77.72 on October 31, 2022 and July 31, 2022, respectively, and the exercise price of outstanding options. Aggregate intrinsic value for exercised options represents the difference between the Company’s stock price at date of exercise and the exercise price.

Share Repurchase Program

In September 2022, the Company's board of directors authorized and approved a share repurchase program of up to $400.0 million of the Company's outstanding common stock. Share repurchases under the program may be made from time to time, in the open market, in privately negotiated transactions and otherwise, at the discretion of management of the Company and in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act, and other applicable legal requirements. Such repurchases may also be made in compliance with Rule 10b5-1 trading plans entered into by the Company.

In September 2022, the Company entered into an accelerated share repurchase (“ASR”) agreement with a large financial institution whereupon the Company provided them with a prepayment of $200.0 million and received an initial delivery of 2,581,478 shares of the Company’s common stock. The ASR is expected to settle between the second and third quarters of fiscal year 2023. Under the terms of the ASR, the total number of shares delivered and average price paid per share will be determined upon settlement based on the volume weighted average price over the term of the ASR, less an agreed upon discount. At settlement, the financial institution may be required to deliver additional shares of the Company’s common stock to the Company or, under certain circumstances, the Company may be required to make a cash payment or deliver shares of the Company’s common stock to the financial institution, with the method of settlement at the Company’s election. As of October 31, 2022, a portion of the ASR prepayment was evaluated as an unsettled forward contract indexed to the Company’s stock, classified within stockholders’ equity.

During the three months ended October 31, 2022, the Company repurchased 2,581,478 shares of common stock through the ASR described above. As of October 31, 2022, $200.0 million remains under the September 2022 authorized and approved share repurchase program.

During the three months ended October 31, 2021, the Company repurchased 226,172 shares of common stock at an average price of $116.12 per share under a previously completed share repurchase program.