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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock‑Based Compensation Stock-based compensation expense is as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Cost of revenue | $ | 10,334 |  |  | $ | 19,591 |  |  | $ | 35,051 |  |  | $ | 58,241 |
Research and development | 58,582 |  |  | 66,618 |  |  | 203,228 |  |  | 214,159 |
Sales and marketing | 21,885 |  |  | 35,075 |  |  | 108,138 |  |  | 105,272 |
General and administrative | 13,816 |  |  | 25,893 |  |  | 139,476 |  |  | 90,071 |
Total stock-based compensation expense | $ | 104,617 |  |  | $ | 147,177 |  |  | $ | 485,893 |  |  | $ | 467,743 |
Included in the above expenses for the nine months ended September 30, 2024, is $94 million of incremental stock-based compensation expense from modifications, primarily within general and administrative. These amounts predominately relate to the modification of awards held by the founders of ironSource Ltd. that departed in the first quarter of 2024. Stock Options A summary of our stock option, including price-vested options ("PVO"), activity is as follows:
| Options Outstanding
| Stock Options Outstanding |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Term (In Years)
Balance as of December 31, 2023 | 31,541,466 |  |  | $ | 19.35 |  |  | 4.79
Granted | 2,614,966 |  |  | $ | 21.29 |  |  |
Exercised | (5,847,858) |  |  | $ | 5.99 |  |  |
Forfeited, cancelled, or expired | (2,073,825) |  |  | $ | 49.58 |  |  |
Balance as of September 30, 2024 | 26,234,749 |  |  | $ | 20.12 |  |  | 4.40
Restricted Stock Units A summary of our restricted stock unit ("RSU"), including price-vested unit ("PVU"), activity is as follows:
| Unvested RSUs
| Number of Shares |  | Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2023 | 37,332,551 |  |  | $ | 38.31 |
Granted | 18,743,697 |  |  | $ | 15.60 |
Vested | (10,722,702) |  |  | $ | 40.09 |
Forfeited | (10,401,800) |  |  | $ | 38.12 |
Unvested as of September 30, 2024 | 34,951,746 |  |  | $ | 25.65 |
Price-Vested Units and Price-Vested Options The vesting for each of the PVOs and PVUs is subject to the fulfillment of both a service period that extends up to four years and the achievement of a stock price hurdle during the relevant performance period that extends up to six and seven years, respectively. The fair value of each PVO and PVU award is estimated using a Monte Carlo simulation that uses assumptions determined on the date of grant. During the three and nine months ended September 30, 2024, the stock price hurdles were not met. Fair Value Assumptions The calculated grant-date fair value of stock options, PVUs, and PVOs granted, were estimated using the Black-Scholes option-pricing model for stock options, and a Monte Carlo stimulation for the PVUs and PVOs, with the following assumptions:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  |  |  |  | 2023 |  | 2024 |  | 2023
Expected dividend yield | — |  |  |  |  | — |  | — |  | —
Risk-free interest rate | 3.5% - 4.2% |  |  |  |  | 4.4% |  | 3.5% - 4.4% |  | 3.8% - 4.4%
Expected volatility | 60.0% - 67.3% |  |  |  |  | 58.0% |  | 60.0% - 67.3% |  | 54.7% - 58.0%
Expected term (in years) | 6.25 - 10.00 |  |  |  |  | 6.25 |  | 6.25 - 10.00 |  | 6.25
Fair value of underlying common stock | $15.60 - $16.75 |  |  |  |  | $39.29 |  | $15.60 - $26.89 |  | $29.33 - $39.29
Employee Stock Purchase Plan The fair value of shares offered under our Employee Stock Purchase Plan ("ESPP") was determined on the grant date using the Black-Scholes option pricing model. The following table summarizes the assumptions used and the resulting grant-date fair values of our ESPP:
| Three Months Ended September 30, |  |  |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  |  |  |  |  | 2024 |  | 2023
Expected dividend yield | — |  | — |  |  |  |  |  | — |  | —
Risk-free interest rate | 4.9% |  | 5.5% |  |  |  |  |  | 4.9% - 5.3% |  | 5.2% - 5.5%
Expected volatility | 49.3% |  | 65.9% |  |  |  |  |  | 49.3% - 56.0% |  | 65.9% - 94.5%
Expected term (in years) | 0.50 |  | 0.50 |  |  |  |  |  | 0.50 |  | 0.50
Grant-date fair value per share | $4.82 |  | $12.65 |  |  |  |  |  | $4.82 - $9.11 |  | $12.44 - $12.65
Additional information related to the ESPP is provided below (in thousands, except per share amounts):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Shares issued under the ESPP | 610,458 |  | 531,820 |  | 1,161,604 |  | 1,064,463
Weighted-average price per share issued | $13.91 |  | $25.25 |  | $19.13 |  | $25.56

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