In January 2018, the Board of Directors adopted the Company’s 2018 Stock Option Plan (as amended), which provided for the issuance of options to purchase up to 3,048,490 shares of the Company’s common stock to officers, directors, employees, and consultants. The option exercise price per share is determined by the Board of Directors based on the estimated fair value of the Company’s common stock.

In June 2019, the Board of Directors adopted the Company’s 2019 Stock Option and Incentive Plan, which replaced the 2018 Stock Option Plan upon the completion of the IPO. The 2019 Plan allows the Compensation Committee to make equity-based incentive awards including stock options, RSUs and PSUs to the Company’s officers, employees, directors, and consultants. The initial reserve for the issuance of awards under this plan was 2,139,683 shares of common stock. The initial number of shares reserved and available for issuance automatically increased on February 1, 2020 and will automatically increase each February 1 thereafter by 5% of the number of shares of common stock outstanding on the immediately preceding January 31 (or such lesser number of shares determined by the Compensation Committee). As of January 31, 2021, there were 2,256,810 shares available for future grant pursuant to 2019 Plan as well as an additional 855,873 shares available for grant pursuant to the newly adopted ESPP.

Options granted under the plans have a maximum term of ten years and vest over a period determined by the Board of Directors (generally four years from the date of grant or the commencement of the grantee’s employment with the Company). Options generally vest 25% at the one-year anniversary of the grant date, after which point they generally vest pro rata on a monthly basis.

In June 2019, the Board of Directors also adopted the Company’s 2019 Employee Stock Purchase Plan (the ESPP), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering. The total shares of common stock initially reserved under the ESPP is limited to 855,873 shares.

The fair value of stock options is estimated on the date of the grant using the Black-Scholes option pricing model for each of the stock option awards granted. The assumptions are provided below. Expected volatility was based on the stock volatility for comparable publicly traded companies. The Company uses the simplified method as described in SEC Staff Accounting Bulletin (SAB) 107 to estimate the expected life of stock options. Forfeitures are recorded when they occur. The risk-free rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the stock option grants. The Company did not grant any options during the year ended January 31, 2021.


	Year ended January 31,
	2020			2019
Risk-free interest rate	2.18		%	2.81		%
Expected dividends	none			none
Expected term (in years)	6.25			6.25
Volatility	45.15		%	40.00		%
Weighted average fair value of grants	$	4.99		$	3.47


	Number of options	Weighted- average exercise price		Weighted- average remaining contractual life (in years)	Aggregate Intrinsic value
Outstanding—February 1, 2019	5,055,505	$	2.45
Granted during the year	1,230,382	$	8.78
Exercised	(691,371)	$	2.62
Forfeited	(78,064)	$	5.20
Outstanding and expected to vest — January 31, 2020	5,516,452	$	3.80	6.22	$	150,152
Exercisable — January 31, 2020	3,824,259	$	2.41	5.16	$	109,351
Amount vested during year ended January 31, 2020	978,170	$	5.31
Outstanding — January 31, 2020	5,516,452	$	3.80
Granted	—	$	—
Exercised	(2,216,368)	$	2.39
Forfeited and expired	(88,730)	$	7.45
Outstanding and expected to vest — January 31, 2021	3,211,354	$	4.67	5.99	$	194,676
Exercisable — January 31, 2021	2,315,820	$	3.62	5.30	$	142,824
Amount vested during year ended January 31, 2021	709,435	$	6.31

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s estimated stock price at the time of exercise and the exercise price, multiplied by the number of related in-the-money options) that would have been received by the option holders had they exercised their options at the end of the period. This amount changes based on the market value of the Company’s common stock. The total intrinsic value of options exercised for the years ended January 31, 2021, 2020 and 2019 (based on the difference between the Company’s estimated stock price on the exercise date and the respective exercise price, multiplied by the number of options exercised), was $33,575, $13,960 and $1,355, respectively.

For the years ended January 31, 2021, 2020 and 2019, the Company recorded stock-based compensation expense for stock options of $2,703, $2,780 and $1,447, respectively. As of January 31, 2021, there is $3,972 of total unrecognized compensation cost related to stock options issued to employees that is expected to be recognized over a weighted-average term of 1.82 years.

(c) Restricted stock units

During fiscal 2020, prior to the IPO, the Company issued stock units to employees and directors that vest based on both a time-based condition and a performance-based condition. Pursuant to the time-based condition, 10% of the restricted stock units vest after one year, 20% vest after two years, 30% vest after three years and 40% vest after four years. The performance-based condition was based on a sale of the Company or an IPO, as defined. The restricted stock units expire seven years from the grant date. Upon completion of the Company’s IPO in July 2019, the Company immediately recognized the fair value of the vested units with the unvested portion recognized over the remaining service period.

In addition, in August 2019, the Company approved allowing executive officers the ability to elect to receive all or a portion of the bonus (based on its target bonus opportunity for the last half of the fiscal year) in the form of restricted stock units instead of cash. For such executive officers that elected to receive restricted stock units, such award was granted immediately after such election with a value equal to the portion of the target bonus opportunity that the executive officer elected not to receive in cash, and such award vests based on the achievement of the Company’s predefined performance targets. These performance-based awards were released in April 2020, after final approval by the Compensation Committee. No awards of this type were granted during the year ended January 31, 2021.

The Company issued 972,271 time-based restricted stock units during the year ended January 31, 2021. These time-based restricted stock units are subject to the same four-year vesting period as the previously granted units.


			Restricted stock units
Outstanding, February 1, 2019			20,164
Granted during year			1,493,678
Vested			(43,011)
Forfeited and expired			(23,413)
Outstanding, February 1, 2020			1,447,418
Granted during year			972,271
Vested			(242,049)
Forfeited and expired			(124,602)
Outstanding, January 31, 2021			2,053,038

For the years ended January 31, 2021 and 2020, the Company recognized $10,693 and $3,356 in restricted stock unit compensation expense, respectively, with $48,588 remaining of total unrecognized compensation costs related to these awards as of January 31, 2021. The total unrecognized costs are expected to be recognized over a weighted-average term of 3.3 years.

For the year ended January 31, 2021, stock-based compensation expense for restricted stock units includes $33 related to restricted stock units issued in connection with the Vital Score acquisition in December 2018. For the year ended January 31, 2020, stock-based compensation expense includes $40 related to restricted stock units issued in connection with the Vital Score acquisition. As of January 31, 2021, there is $58 of total unrecognized compensation cost related to these awards. For the years ended January 31, 2021 and 2020, the weighted average grant date fair value of restricted stock units granted was $32.78 and $21.31 respectively. No restricted stock units were granted during the year ended January 31, 2019.

In the fourth quarter of fiscal 2021, the Company granted 70,806 PSUs to certain members of our senior management team. The PSUs vest on January 15, 2024 upon satisfaction of both time-based requirements and market targets based on Phreesia's TSR relative to the TSR of each member of the Russell 3000 Index (the "Peer Group"). Depending on the percentage level at which the market-based condition is satisfied, the number of shares vesting could be between 0% and 200% of the number of PSUs originally granted. To earn the target number of

PSUs (which represents 100% of the number of PSUs granted), the Company must perform at the 60th percentile, with the maximum number of PSUs earned if the Company performed at least at the 90th percentile. If Phreesia's TSR for the performance period is negative, the maximum number of PSUs that can be earned will be capped at 100%. The maximum number of shares that could vest under for the PSUs is 141,612 shares.

The Company estimated the fair value of the PSUs using a Monte Carlo Simulation model which projected TSR for Phreesia and each member of the Peer Group over the three year performance period. The following table summarizes the weighted average assumptions used in the Monte Carlo Simulation to estimate the grant-date fair value of the PSUs.


	January 31,
	2021
Correlation coefficient	0.4230
Valuation date stock price	$	62.96
Simulation term	3.00 Years
Volatility	43.71		%
Risk-free rate	0.20		%
Dividend yield	—		%
Weighted average fair value of grants	$	84.38

During the year ended January 31, 2021, the Company recorded $93 of stock-based compensation expense for the PSUs. As of January 31, 2021, unrecognized compensation cost for the PSUs was $5,882, to be recognized on a straight-line basis over 3.0 years, subject to the participants' continued employment with the Company.