Stockholders’ Equity and Stock-based Compensation

Stock-based Compensation Expenses

Stock-based compensation expenses related to all employee and non-employee stock-based awards was as follows:



	Three Months Ended April 30,				Nine Months Ended April 30,
	2013		2012		2013 ⁽¹⁾		2012 ⁽²⁾
Stock-based compensation expenses:	(in thousands)
Cost of maintenance revenues	$	313	$	86	$	914	$	271
Cost of services revenues	3,150		907		9,205		2,648
Research and development	2,056		836		6,544		2,939
Sales and marketing	676		905		4,269		1,929
General and administrative	2,077		1,540		7,498		6,091
Total stock-based compensation expenses	$	8,272	$	4,274	$	28,430	$	13,878

(1) Includes $1.0 million of expense related to the modification of RSUs upon accelerated vesting terms for the retirement of one of the Company's officers and $1.0 million reversal of expense related to the termination of one of the Company's executive officers.

(2) Includes $1.2 million of expense related to the satisfaction of performance-based criteria upon successful close of the Company's IPO.

As of April 30, 2013, total unrecognized compensation cost, adjusted for estimated forfeitures, was as follows:



	As of April 30, 2013
	Unrecognized Expense		Average Expected Recognition Period
	(in thousands)		(in years)
Restricted stock units	$	39,165	1.3
Stock options	3,443		1.1
	$	42,608

RSUs

RSU activity under the Company's equity incentive plans for the period presented is as follows:



	RSUs Outstanding
	Number of RSUs Outstanding		Weighted Average Grant Date Fair Value
Balance as of July 31, 2012	3,992,177		$	8.00
Granted	1,697,979		32.44
Released	(1,230,687	)	9.30
Cancelled	(296,092	)	15.96
Balance as of April 30, 2013	4,163,377		$	17.48

The fair value of RSUs released during the three and nine months ended April 30, 2013 was $14.9 million and $40.4 million, respectively.

Stock Options

The options exercisable as of April 30, 2013 include options that are exercisable prior to vesting. The total intrinsic value of options exercised was approximately $23.3 million and $10.5 million for the three months ended April 30, 2013 and 2012, respectively, and $76.4 million and $20.3 million for the nine months ended April 30, 2013 and 2012, respectively.



	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, 2012	6,486,641		$	3.74	6.1	$	142,321
Granted	377,412		32.36
Exercised	(2,653,065	)	2.98
Cancelled	(194,445	)	10.58
Balance as of April 30, 2013	4,016,543		$	6.60	5.9	$	134,471
Vested and expected to vest as of April 30, 2013	3,953,905		$	6.40	5.8	$	133,158
Exercisable as of April 30, 2013	3,628,247		$	4.34	5.5	$	129,663


⁽¹⁾	Aggregate intrinsic value represents the difference between the Company's closing stock price of $40.08 and $25.66 on April 30, 2013 and July 31, 2012, respectively, and the exercise price of outstanding, in-the-money options.

Valuation of Awards

The per share fair value of each stock option was determined on the date of grant using the Black-Scholes option pricing model and the following assumptions:



	Three Months Ended April 30,		Nine Months Ended April 30,
	2013	2012	2013	2012
Expected life (in years)	6.1	5.3	5.1 - 6.1	5.3 - 6.3
Risk-free interest rate	1.2%	1.5%	0.6% - 1.2%	1.2% - 1.5%
Expected volatility	46.9%	46.4%	45.1% - 48.7%	44.1% - 46.4%
Expected dividend yield	—%	—%	—%	—%

Common Stock Reserved for Issuance

As of April 30, 2013 and July 31, 2012, the Company was authorized to issue 500,000,000 shares of common stock with a par value of $0.0001 per share. As of April 30, 2013 and July 31, 2012, the Company had reserved shares of common stock for issuance as follows:



	April 30, 2013	July 31, 2012
Exercise of stock options to purchase common stock	4,016,543	6,486,641
Vesting of restricted stock units	4,163,377	3,992,177
Issuances of shares available under stock plans	9,308,740	7,655,332
Total common stock reserved for issuance	17,488,660	18,134,150

Equity Incentive Plans

In February 2007, the Company’s board of directors (“Board”) adopted and the stockholders approved the 2006 Stock Plan (“2006 Plan”) as an amendment and restatement of the stockholder-approved 2002 Stock Option/Stock Issuance Plan, as amended, providing for the issuance of incentive and nonstatutory options to employees and nonemployees of the Company and under which 13,922,216 shares had been reserved for issuance as of April 30, 2013.

In July 2009, the Board adopted and the stockholders approved the 2009 Stock Plan (“French Plan”). Under the French Plan, 31,000 shares had been reserved for issuance as of April 30, 2013. The number of shares exercised and issued under the French Plan reduced the corresponding number of shares available under the 2006 Plan.

In June 2010, the Board adopted and the stockholders approved the 2010 Restricted Stock Unit Plan (“2010 Plan”). As of April 30, 2013, the Company had reserved 4,032,567 shares of common stock for issuance under the 2010 Plan.

On September 14, 2011, the Board, upon the recommendation of the Compensation Committee of the Board (“Committee”), adopted the 2011 Stock Plan (“2011 Plan”), which was subsequently approved by the Company’s stockholders in January 2012. The 2011 Plan provides flexibility to the Committee to use various equity-based incentive awards as compensation tools to motivate the Company’s workforce. The Company had initially reserved 7,500,000 shares of its common stock for the issuance of awards under the 2011 Plan. In addition, the number of shares remaining available for grant under the 2006 Plan and 2010 Plan immediately prior to the closing of the IPO were added to the shares available under the 2011 Plan. The number of shares remaining available for grant under the French Plan expired upon the IPO. The 2011 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2013, by up to 5% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31. This number is subject to adjustment in the event of a stock split, stock dividend or other defined changes in the Company’s capitalization. With the adoption of the 2011 Plan upon the completion of the Company’s IPO, both option and RSU grants now reduce the 2011 Plan reserve. As of April 30, 2013, the Company had reserved 11,634,302 shares of common stock for issuance under the 2011 Plan.

The shares the Company issues under the 2011 Plan will be authorized but unissued shares or shares that are reacquired. The shares of common stock underlying any awards under the 2011 Plan, 2010 Plan and 2006 Plan that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without any issuance of stock or are otherwise terminated (other than by exercise) are added back to the shares of common stock available for issuance under the 2011 Plan. The shares of common stock underlying any outstanding awards under the French Plan that are forfeited, canceled or otherwise not issued will expire and not be available for future issuance.

No awards may be granted under the 2011 Plan after the date that is 10 years from the effectiveness of the plan. No awards under the 2011 Plan were granted prior to the Company’s IPO. Following the closing of the IPO, no additional awards will be made under the 2006 Plan, French Plan and 2010 Plan.