XML 42 R27.htm IDEA: XBRL DOCUMENT v3.24.0.1
Stock-Based Compensation
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
2008 Stock Option Plan
In connection with the Company’s initial public offering on June 22, 2016, the 2008 Stock Option Plan, as amended and restated (the “2008 Plan”), was terminated and, accordingly, no shares were available for issuance after the termination. As of December 31, 2023 and 2022, all remaining outstanding stock options granted under the 2008 Plan were vested and exercisable and continue to be governed by the provisions of this plan.
2016 Stock Option Plan
The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) became effective on June 21, 2016. The 2016 Plan provides for the grant of ISOs, NSOs, restricted stock, RSUs, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to employees, directors and consultants of the Company. A total of 11,500,000 shares of the Company’s Class A common stock were initially reserved for issuance under the 2016 Plan. These available shares automatically increase each January 1, beginning on January 1, 2017, by 5% of the number of shares of the Company’s Class A and Class B common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s compensation committee. On January 1, 2023 and 2022, the shares available for grant under the 2016 Plan were automatically increased by 9,298,785 shares and 9,023,405 shares, respectively.
Under the 2016 Plan, the stock options are granted at a price per share not less than 100% of the fair market value per share of the underlying common stock on the date of grant.
SendGrid 2009, 2012 and 2017 Stock Incentive Plans
In connection with its acquisition of SendGrid, the Company assumed and replaced all stock options and restricted stock units of the continuing employees issued under SendGrid’s 2009, 2012 and 2017 Stock Incentive Plans that were unvested and outstanding on the date of acquisition. The assumed equity awards continue to vest and are governed by the provisions of their respective plans. Additionally, the Company assumed shares of SendGrid common stock that were reserved and available for issuance under SendGrid's 2017 Equity Incentive Plan, on an as converted basis. These shares were utilized for equity grants under the Company’s 2016 Plan in the post-acquisition period, to the extent permitted by New York Stock Exchange rules.
Segment 2013 Stock Incentive Plan
In connection with its acquisition of Segment, the Company assumed and replaced all stock options and restricted stock units of the continuing employees issued under Segment’s 2013 Stock Incentive Plan (“Segment Plan”) that were unvested and outstanding on the acquisition date. The assumed equity awards continue to vest and are governed by the provisions of the Segment Plan.
Zipwhip 2008 Stock Plan and 2018 Equity Incentive Plan
In connection with its acquisition of Zipwhip, the Company assumed and replaced all stock options and restricted stock units of the continuing employees issued under Zipwhip’s Amended and Restated 2008 Stock Plan and 2018 Equity Incentive Plan (“Zipwhip Plans”) that were unvested and outstanding on the acquisition date. The assumed equity awards continue to vest and are governed by the provisions of the Zipwhip Plans.
Under all plans, stock options generally expire 10 years from the date of grant and vest over periods determined by the board of directors. The vesting period for stock options and restricted stock units is generally four years from the date of grant. For existing employees and, effective in 2022, for new-hires the stock options and restricted stock units vest in equal monthly and quarterly installments, respectively, over the service period.
2016 Employee Stock Purchase Plan
The Company’s 2016 ESPP was effective on June 21, 2016. A total of 2,400,000 shares of the Company’s Class A common stock were initially reserved for issuance under the 2016 ESPP. These available shares automatically increase each January 1, beginning on January 1, 2017, by the lesser of 1,800,000 shares of the Company's Class A common stock, 1% of the number of shares of the Company’s Class A and Class B common stock outstanding on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee. On each of January 1, 2023 and 2022, the shares available for grant under the 2016 ESPP were automatically increased by 1,800,000 shares.
The 2016 ESPP allows eligible employees to purchase shares of the Company’s Class A common stock at a discount of 15% through payroll deductions of their eligible compensation, subject to any plan limitations. The 2016 ESPP provides for separate six-month offering periods beginning in May and November of each year.
On each purchase date, eligible employees purchase the Company’s stock at a price per share equal to 85% of the lesser of (i) the fair market value of the Company’s Class A common stock on the offering date or (ii) the fair market value of the Company’s Class A common stock on the purchase date.
As of December 31, 2023, total unrecognized compensation cost related to the 2016 ESPP was not significant.
Stock-options and restricted stock units and awards activity under the Company’s equity incentive plans is as follows:
Stock Options
Number of
options
outstanding		Weighted-
average
exercise
price
(Per share)		Weighted-
average
remaining
contractual
term
(In years)		Aggregate
intrinsic
value
(In thousands)
Outstanding options as of December 31, 20222,277,379 $75.54 5.32$39,167 
Exercised(366,456)$20.18 
Forfeited and canceled(188,062)$223.76 
Outstanding options as of December 31, 20231,722,861 $71.13 4.45$56,007 
Options vested and exercisable as of December 31, 20231,567,840 $63.06 4.10$55,831 
Year Ended December 31,
202320222021
(In thousands, except per share amounts)
Aggregate intrinsic value of stock options exercised (1)
$15,242 $80,839 $508,539 
Total estimated grant date fair value of options vested$28,619 $77,403 $138,851 
Weighted-average grant date fair value per share of options granted$— $50.66 $216.29 
____________________________________
(1) Aggregate intrinsic value represents the difference between the fair value of the Company’s Class A common stock as reported on the New York Stock Exchange and the exercise price of outstanding “in-the-money” options.
As of December 31, 2023, total unrecognized compensation cost related to all unvested stock options was not significant.
Restricted Stock Units
Number of
awards
outstanding		Weighted-
average
grant date
fair value
(Per share)		Aggregate
intrinsic
value
(In thousands)
Unvested RSUs as of December 31, 202215,414,997 $130.97 $754,718 
Granted14,716,790 $65.73 
Vested(5,939,641)$116.30 
Forfeited and canceled(5,436,608)$120.16 
Unvested RSUs as of December 31, 202318,755,538 $87.56 $1,422,983 
In March 2022, the Company granted 919,289 shares of performance-based restricted stock units (“PSU”) to certain of its executive employees. These awards activity is included in the table above. The PSUs were granted with a grant date fair value per share of $157.44 and an aggregate grant date fair value of $144.7 million. The Company estimated the fair value of these awards based on the closing price of its Class A common stock on the date of grant. Each PSU award consisted of three tranches that vest separately over distinct service periods if its respective performance targets, as defined in the grant agreements, are achieved in the respective periods. The final vesting is determined by the Company’s Compensation Committee subsequent to the completion of the vesting period. The vesting of the first tranche was based on achievement of revenue growth targets with respect to the year ended December 31, 2022. The vesting of the second and third tranches was based on both (a) revenue growth targets and (b) profitability targets achievement with respect to each of the years ended December 31, 2023 and 2024. If performance targets are not achieved, the related tranches are forfeited. Vesting of these performance-based restricted stock unit awards can range up to 100% above the target based on levels of performance and is recorded in stock-based compensation expense in the year during which each tranche vests.
As of December 31, 2023, total unrecognized compensation cost related to unvested RSUs was $1.5 billion, which will be amortized over a weighted-average period of 2.7 years.
Valuation Assumptions
The Company did not grant stock options in the year ended December 31, 2023. The Company used the following assumptions in the Black-Scholes option pricing model to estimate the fair value of the employee stock options:
Year Ended December 31,
Employee Stock Options:20222021
Fair value of common stock
$85.17
$268.55 - $409.21
Expected term (in years)
6.02
0.30 - 6.39
Expected volatility
61.6%
42.9% - 61.5%
Risk-free interest rate
3.3%
0.1% - 1.4%
Dividend rate
—%
—%
The Company used the following assumptions in the Black-Scholes option pricing model to estimate the fair value of the purchase rights issued under the 2016 ESPP:
Year Ended December 31,
Employee Stock Purchase Plan:202320222021
Fair value of common stock
$47.36 - $61.55
$50.81 - $99.68
$297.20 - $310.80
Expected term (in years)0.50
0.50
0.50
Expected volatility
45.8% - 57.1%
73.2% - 97.3%
46.4% - 58.7%
Risk-free interest rate
5.3% - 5.4%
1.5% - 4.5%
—% - 0.1%
Dividend rate
—%
—%
—%
Stock-Based Compensation Expense
The Company recorded stock-based compensation expense as follows:
Year Ended December 31,
202320222021
(In thousands)
Cost of revenue$26,343 $21,136 $14,074 
Research and development331,526 374,846 258,672 
Sales and marketing183,389 240,109 213,351 
General and administrative121,584 148,194 146,188 
Restructuring costs13,015 14,275 — 
Total$675,857 $798,560 $632,285