Stock-based compensation

The following table shows a summary of stock-based compensation in the Company's condensed consolidated statements of operations and comprehensive income during the periods presented:



	Three months ended April 30,
(in thousands)	2019		2018
Cost of revenue	$	860	$	413
Sales and marketing	1,007		705
Technology and development	1,499		991
General and administrative	2,662		2,130
Total stock-based compensation expense	$	6,028	$	4,239

The following table shows stock-based compensation by award type:



	Three months ended April 30,
(in thousands)	2019		2018
Stock options	$	1,783	$	1,764
Performance stock options	—		153
Restricted stock units	2,926		1,542
Performance restricted stock units	651		514
Restricted stock awards	163		55
Performance restricted stock awards	505		211
Total stock-based compensation expense	$	6,028	$	4,239

Stock options

The Company currently grants stock options under the 2014 Equity Incentive Plan (as amended and restated, the"Incentive Plan"), which provided for the issuance of stock options to the directors and team members of the Company to purchase up to an aggregate of 2.6 million shares of common stock.

In addition, under the Incentive Plan, the number of shares of common stock reserved for issuance under the Incentive Plan automatically increases on February 1 of each year, beginning as of February 1, 2015 and continuing through and including February 1, 2024, by 3% of the total number of shares of the Company’s capital stock outstanding on January 31 of the preceding fiscal year, or a lesser number of shares determined by the board of directors.

Under the terms of the Incentive Plan, the Company has the ability to grant incentive and nonqualified stock options. Incentive stock options may be granted only to Company team members. Nonqualified stock options may be granted to Company executive officers, other team members, directors and consultants. Such options are to be exercisable at prices, as determined by the board of directors, which must be equal to no less than the fair value of the Company's common stock at the date of the grant. Stock options granted under the Incentive Plan generally expire 10 years from the date of issuance, or are forfeited 90 days after termination of employment. Shares of common stock underlying stock options that are forfeited or that expire are returned to the Incentive Plan.

Valuation assumptions. The Company has adopted the provisions of Topic 718, which requires the measurement and recognition of compensation for all stock-based awards made to team members and directors, based on estimated fair values.

Under Topic 718, the Company uses the Black-Scholes option pricing model as the method of valuation for stock options. The determination of the fair value of stock-based awards on the date of grant is affected by the fair value of the stock as well as assumptions regarding a number of complex and subjective variables. The variables include, but are not limited to, 1) the expected life of the option, 2) the expected volatility of the fair value of the Company's common stock over the term of the award estimated by averaging the Company's historical volatility in addition to published volatilities of a relative peer group, 3) risk-free interest rate, and 4) expected dividends.

Note 9. Stock-based compensation (continued)

The key input assumptions that were utilized in the valuation of the stock options granted during the periods presented:



	Three months ended April 30,
	2019		2018
Expected dividend yield	—	%	—	%
Expected stock price volatility	35.98% - 36.53%		37.84	%
Risk-free interest rate	2.21% - 2.43%		2.52% - 2.68%
Expected life of options	4.95 - 5.09 years		5.17 - 6.25 years

The Company historically used the "simplified" method to estimate the expected life of an option as determined under Staff Accounting Bulletin No. 110 due to limited option exercise history as a public company. Commencing February 1, 2019, the Company began estimating the expected life of an option using its own historical option exercise and termination data. Expected volatility is determined using weighted average volatility of the Company's historical common stock price in addition to published volatilities of publicly traded peer companies. The risk-free interest rate is determined by using published zero coupon rates on treasury notes for each grant date given the expected term on the options. The dividend yield of zero is based on the fact that the Company expects to invest cash in operations.

A summary of stock option activity is as follows:



	Outstanding stock options
(in thousands, except for exercise prices and term)	Number of options		Range of exercise prices	Weighted- average exercise price		Weighted- average contractual term (in years)	Aggregate intrinsic value
Outstanding as of January 31, 2019	2,444		$0.10 - 82.39	$	27.37	6.74	$	85,971
Granted	108		$63.64 - 73.61	$	73.27
Exercised	(178	)	$0.10 - 44.53	$	24.49
Forfeited	(18	)	$24.36 - 44.53	$	30.92
Outstanding as of April 30, 2019	2,356		$0.10 - 82.39	$	29.66	6.62	$	90,701
Vested and expected to vest as of April 30, 2019	2,356			$	29.66	6.62	$	90,701
Exercisable as of April 30, 2019	1,503			$	21.82	5.91	$	69,042

The aggregate intrinsic value in the table above represents the difference between the estimated fair value of common stock and the exercise price of outstanding, in-the-money stock options.

As of April 30, 2019, the weighted-average vesting period of non-vested awards expected to vest is approximately 1.9 years; the amount of compensation expense the Company expects to recognize for stock options vesting in future periods is approximately $12.4 million.

Restricted stock units and restricted stock awards

The Company grants restricted stock units ("RSUs") and restricted stock awards ("RSAs") to certain team members, officers, and directors under the Incentive Plan. RSUs and RSAs vest upon service-based criteria and performance-based criteria. Generally, service-based RSUs and RSAs vest over a four-year period in equal annual installments commencing upon the first anniversary of the grant date. RSUs and RSAs are valued based on the current value of the Company's closing stock price on the date of grant less the present value of future expected dividends discounted at the risk-free interest rate.

Performance restricted stock units and awards. In March 2017, the Company awarded 146,964 performance-based RSUs ("PRSUs"). Vesting of the PRSUs is dependent upon the achievement of certain financial criteria and cliff vest on January 31, 2020. The Company records stock-based compensation related to PRSUs when it is

Note 9. Stock-based compensation (continued)

considered probable that the performance conditions will be met. Issuance of the underlying shares occurs at vesting. The Company believes it is probable that the PRSUs will vest at least in part. The vesting of the PRSUs will ultimately range from 0% to 150% of the number of shares underlying the PRSU grant based on the level of achievement of the performance goals.

In March 2018, the Company awarded 227,760 performance-based RSAs ("PRSAs"). Vesting of the PRSAs is dependent upon the achievement of certain financial criteria and cliff vest on January 31, 2021. The Company records stock-based compensation related to PRSAs when it is considered probable that the performance conditions will be met. Issuance of the underlying shares occured at the grant date. The Company believes it is probable that the PRSAs will vest at least in part. The vesting of the PRSAs will ultimately range from 0% to 200% based on the level of achievement of the performance goals. The PRSAs were issued at the 200% level of achievement. As the underlying shares were issued at grant date, they are subject to clawback based on actual Company performance.

In March 2019, the Company awarded 129,963 PRSUs. Vesting of the PRSUs is dependent upon the achievement of certain financial criteria and cliff vest on January 31, 2022. The Company records stock-based compensation related to PRSUs when it is considered probable that the performance conditions will be met. Issuance of the underlying shares occurs at vesting. The Company believes it is probable that the PRSUs will vest at least in part. The vesting of the PRSUs will ultimately range from 0% to 200% of the number of shares underlying the PRSU grant based on the level of achievement of the performance goals.

A summary of the RSU and RSA activity is as follows:



	RSUs and PRSUs				RSAs and PRSAs
(in thousands, except weighted-average grant date fair value)	Shares		Weighted-average grant date fair value		Shares		Weighted-average grant date fair value
Outstanding as of January 31, 2019	648		$	55.20	256		$	61.93
Granted	421		73.02		—		—
Vested	(94	)	52.35		(11	)	62.75
Forfeited	(19	)	54.48		(10	)	61.72
Outstanding as of April 30, 2019	956		$	63.33	235		$	61.91

For the three months ended April 30, 2019, the aggregate intrinsic value of RSUs and RSAs vested was $6.9 million and $0.8 million, respectively. For the three months ended April 30, 2018, the aggregate intrinsic value of RSUs vested was $2.9 million.

Total unrecorded stock-based compensation expense as of April 30, 2019 associated with RSUs and PRSUs was $52.0 million, which is expected to be recognized over a weighted-average period of 2.8 years. Total unrecorded stock-based compensation expense as of April 30, 2019 associated with RSAs and PRSAs was $6.2 million, which is expected to be recognized over a weighted-average period of 2.1 years.