Note 8. Stockholders’ Equity

Stock Option Activity

A summary of stock option activity for the six months ended July 31, 2017 is as follows:

						Weighted
				Weighted		average
				average		remaining		Aggregate
	Number			exercise		contractual		intrinsic
	of shares			price		term (in years)		value
Options outstanding at January 31, 2017		16,282,343		$	7.48		6.3	$	567,491,532
Options granted		13,000			57.37
Options exercised		(1,918,647	)		7.06
Options forfeited/cancelled		(108,201	)		21.87
Options outstanding at July 31, 2017		14,268,495		$	7.47		5.8	$	803,181,095
Options vested and exercisable at July 31, 2017		5,648,977		$	5.19		5.3	$	330,863,470
Options vested and exercisable at July 31, 2017 and expected to vest thereafter		14,268,495		$	7.47		5.8	$	803,181,095

During the three and six months ended July 31, 2017, we granted 6,500 and 13,000 stock options, respectively, under the 2013 Equity Incentive Plan (EIP). The weighted average grant-date fair value of options granted was $29.11 and $25.89 for the three and six months ended July 31, 2017 and $11.99 for the six months ended July 31, 2016. We did not grant any stock options during the three months ended July 31, 2016.

As of July 31, 2017, there was $32.8 million in unrecognized compensation cost related to unvested stock options granted under the 2007 Stock Plan (2007 Plan), 2012 Equity Incentive Plan and 2013 EIP. This cost is expected to be recognized over a weighted average period of 3.1 years.

As of July 31, 2017, we had authorized and unissued shares of common stock sufficient to satisfy exercises of stock options.

The total intrinsic value of options exercised was approximately $40.7 million and $88.8 million for the three and six months ended July 31, 2017.

Restricted Stock Units

A summary of restricted stock unit (RSU) activity for the six months ended July 31, 2017 is as follows:

				Weighted
	Unreleased			average
	restricted			grant date
	stock units			fair value
Balance at January 31, 2017		3,362,650		$	29.33
RSUs granted		876,244			51.96
RSUs vested		(605,180	)		29.73
RSUs forfeited/cancelled		(246,247	)		30.71
Balance at July 31, 2017		3,387,467		$	35.03

During the three and six months ended July 31, 2017, we granted 297,959 and 876,244 RSUs under the 2013 EIP with a weighted-average grant date fair value of $59.55 and $51.96, respectively.

As of July 31, 2017, there was a total of $112.0 million in unrecognized compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of approximately 2.7 years.

Stock-Based Compensation

Compensation expense related to share-based transactions, including equity awards to employees, consultants, and non-employee directors, is measured and recognized in the condensed consolidated financial statements based on fair value. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. The stock-based compensation expense, net of forfeitures, is recognized using a straight-line basis over the requisite service periods of the awards, which is generally four to nine years. For RSUs, fair value is based on the closing price of our common stock on the grant date. We adopted ASU 2016-09 on February 1, 2017. Upon adoption, we have elected to account for forfeitures as they occur and to no longer estimate for forfeitures. As such, we recorded a net cumulative-effect adjustment of $0.7 million to increase our February 1, 2017 opening retained earnings balance. See notes 1 and 7 for additional information on the tax impact.

Our option-pricing model requires the input of subjective assumptions, including the fair value of the underlying common stock, the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock. The assumptions used in our option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

The following table presents the weighted-average assumptions used to estimate the grant date fair value of options granted during the periods presented:

	Three Months Ended July 31,			Six Months Ended July 31,
	2017		2016	2017		2016
Volatility		43%	—	43% – 44%		45% – 46%
Expected term (in years)		6.35	—		6.35	6.31 – 7.56
Risk-free interest rate		1.89%	—	1.89% – 2.17%		1.48% – 1.67%
Dividend yield		0%	—		0%		0%

For the three and six months ended July 31, 2017 and 2016, we capitalized an immaterial amount of stock-based compensation as part of our internal-use software capitalization.

Early Exercise of Employee Options

We historically have allowed for the early exercise of options granted under the 2007 Plan prior to vesting. Historically, all such early exercises have been through cash payment. The unvested shares are subject to our repurchase right at the original purchase price. The proceeds initially are recorded as an accrued liability from the early exercise of stock options, and reclassified to common stock as our repurchase right lapses. At July 31, 2017, there were no unvested shares which were subject to repurchase. At January 31, 2017, there were 2,500 unvested shares which were subject to repurchase at an aggregate price of an immaterial amount.