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STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Stock options Activity of options outstanding are as follows (in thousands, except per share and years data):
| Options Outstanding |  | Weighted Average Exercise Price per Share |  | Weighted Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value
Balance at January 1, 2023 | 31,795 |  |  | $ | 23.31 |  |  | 6.95 |  | $ | 504,222 |
Granted | 843 |  |  | 73.07 |  |  |  |  |
Exercised | (1,883) |  |  | 14.61 |  |  |  |  |
Forfeited and cancelled | (814) |  |  | 41.14 |  |  |  |  |
Balance at September 30, 2023 | 29,941 |  |  | $ | 24.77 |  |  | 6.32 |  | $ | 1,583,971 |
Exercisable at September 30, 2023 | 23,800 |  |  | $ | 25.12 |  |  | 6.18 |  | $ | 1,266,795 |
Vested and expected to vest at September 30, 2023 | 23,858 |  |  | $ | 25.10 |  |  | 6.18 |  | $ | 1,270,146 |
During the three months ended September 30, 2023, the Company granted no stock options. During the nine months ended September 30, 2023, the Company granted stock options for the purchase of 842,617 shares of the Company’s Class A common stock with a weighted-average grant date fair value of $40.85 per share to certain employees of the Company. The stock options vest over three years at a rate of 1/12 per quarter. As of September 30, 2023, there was total unrecognized compensation cost of $87.3 million related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately 2.3 years. The assumptions used under the Black-Scholes-Merton Option-Pricing Model to calculate the fair value of the options granted to employees were as follows:
| Nine Months Ended September 30,
| 2023 |  | 2022
Dividend yield | 0.0 | % |  | 0.0 | %
Expected volatility | 90.5 | % |  | 59.3 | %
Expected term (in years) | 5.8 |  | 5.8
Risk-free interest rate | 3.9 | % |  | 2.1 | %
As of September 30, 2023, there were 50,986 shares o f Class A common stock subject to repurchase related to stock options exercised early and not yet vested, but that are expected to vest. As of September 30, 2023, the Company recorded a liability related to these shares subject to repurchase in the amount of $1.2 million, which is i ncluded within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. Chief Executive Officer performance stock options During the three and nine months ended September 30, 2023, stock-based compensation expense of $1.0 million and $2.9 million, respectively, was recognized related to the Chief Executive Officer performance based stock options. R estricted stock units The Company issues RSUs that vest upon the satisfaction of a service-based condition. In general, the RSUs vest over a service period ranging from one to four years. Once vested, the RSUs are settled by delivery of Class A common stock. Activity of RSUs outstanding are as follows (in thousands, except per share data):
| Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
Balance at January 1, 2023 | 5,329 |  |  | $ | 127.85 |
Granted | 9,316 |  |  | 57.59 |
Vested | (7,763) |  |  | 71.61 |
Forfeited and cancelled | (1,286) |  |  | 120.61 |
Balance at September 30, 2023 | 5,596 |  |  | $ | 90.58 |
For RSUs granted during the three and nine months ended September 30, 2023, the closing price of the Company’s Class A common stock as reported on The Nasdaq Global Select Market on the grant date was used as the fair value. As of September 30, 2023, there was total unrecognized compensation cost of $429.1 million related to unvested RSUs. These costs are expected to be recognized over a weighted-average period of approximately 1.3 years. Performance restricted stock units The Company also grants PRSUs, which are subject to either (a) a market condition or (b) the achievement of performance goals. President & Chief Operating Officer Performance Award On April 20, 2023, the Company’s Compensation Committee granted the President & Chief Operating Officer an award of PRSUs covering a target of 401,983 shares of the Company’s Class A common stock and up to a maximum of 803,966 shares of the Company’s Class A common stock (the “2023 COO Performance Award”). Up to 40% of the 2023 COO Performance Award is subject to vesting based upon achievement of certain cumulative revenue and cumulative adjusted EBITDA target values which are separately evaluated for the period commencing January 1, 2023 and ending on December 31, 2025, subject to her continued employment until February 20, 2026. Up to 60% of the 2023 COO Performance Award is subject to vesting in increments based upon a relative shareholder return target value for the three annual periods between January 1, 2023 and December 31, 2025, and the three year period between January 1, 2023 and December 31, 2025, subject to her continued employment through the applicable year end dates. The total grant date fair value of this award was $25.1 million. The Company determined the fair value of the portion of the award subject to a market condition using a Monte Carlo Simulation Model (a binomial lattice-based valuation model). The Monte Carlo Simulation Model uses multiple input variables to determine the probability of satisfying the market condition requirements. The fair value of the award is not subject to change based on future market conditions. The Company uses the accelerated attribution method to recognize expense for each vesting tranche over the requisite service period for the 2023 COO Performance Award. For the portion of the award subject to a market condition, compensation expense is recognized over the requisite service period regardless of whether or not the market condition is ultimately satisfied, according to the market-based fair value measured on the grant date, subject to continued service over the period. For the portion of the award subject to financial performance conditions, the Company evaluates the cumulative revenue and the cumulative adjusted EBITDA results at each reporting date to determine which performance condition and level of achievement becomes most probable of being achieved for the three-year assessment period. Compensation expense is recognized over the requisite service period based on the result that is probable of occurring at each reporting date until the final vesting date, subject to continued service over the period. During the three and nine months ended September 30, 2023, stock-based compensation expense of $3.5 million and $6.3 million, respectively, was recognized related to this award. Activity of PRSUs outstanding are as follows (in thousands, except per share data):
| Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
Balance at January 1, 2023 | — |  |  | $ | — |
Granted | 804 |  |  | 55.42 |
Balance at September 30, 2023 | 804 |  |  | $ | 55.42 |
As of September 30, 2023, there was total unrecognized compensation cost of $18.8 million related to unvested PRSUs. These costs are expected to be recognized over a weighted-average period of approximately 2.0 years. Restricted common stock As part of the Company’s acquisitions, the Company has issued shares of restricted Class A common stock. Vesting of this restricted Class A common stock is dependent on a service-based vesting condition that is generally satisfied over three years. The Company has the right to repurchase shares at par value for which the vesting condition is not satisfied. Activity of restricted Class A common stock is as follows (in thousands, except per share data):
| Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
Balance at January 1, 2023 | 1,275 |  |  | $ | 139.72 |
Granted | 263 |  |  | 64.51 |
Vested | (954) |  |  | 130.45 |
Forfeited and cancelled | (29) |  |  | 171.85 |
Balance at September 30, 2023 | 555 |  |  | $ | 118.33 |
As of September 30, 2023, there was total unrecognized compensation cost o f $40.4 million related to unvested restricted Class A common stock. These costs are expected to be recognized over a weighted-average period of approximately 1.6 years. Employee Stock Purchase Plan The ESPP allows eligible employees the option to purchase shares of the Company's Class A common stock at a 15% discount, over a series of offering periods through accumulated payroll deductions over the period. The ESPP also includes a look-back provision for the purchase price if the stock price on the purchase date is lower than the stock price on the offering date. The Company recognizes stock-based compensation expenses related to purchase rights issued pursuant to its ESPP on a straight-line basis over the offering period, which is 24 months. The fair value of purchase rights under the ESPP are estimated on the date of grant using the Black-Scholes-Merton Option-Pricing Model. The grant date of the initial offering period was May 3, 2021, and that offering period ended on April 30, 2023. Subsequent offering periods will commence in each May and November after the start of the initial offering period. As of September 30, 2023, the Company recorded a liability of $8.6 million related to the accumulated payroll deductions, which are refundable to employees who withdraw from the ESPP. T his amount is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. Stock-based compensation expense Stock-based compensation is included in the following components of expenses on the accompanying condensed consolidated statements of operations (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Technology and development | $ | 130,776 |  |  | $ | 275,817 |  |  | $ | 376,941 |  |  | $ | 793,573 |
Sales and marketing | 16,556 |  |  | 18,461 |  |  | 45,695 |  |  | 52,813 |
General and administrative | 70,821 |  |  | 97,163 |  |  | 194,149 |  |  | 288,692 |
Restructuring | — |  |  | — |  |  | 84,042 |  |  | — |
Total | $ | 218,153 |  |  | $ | 391,441 |  |  | $ | 700,827 |  |  | $ | 1,135,078 |
During the three and nine months ended September 30, 2023, $15.7 million and $44.7 million of stock-based compensation expense was included in capitalized software, respectively. During the three and nine months ended September 30, 2022, $26.3 million and $97.7 million of stock-based compensation expense was included in capitalized software, respectively.

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