Equity Awards and Instruments

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation Expense

Total stock‑based compensation expense was as follows:


	Three Months Ended
	March 31,
	2021		2020
Stock option expense	$	998	$	1,534
Restricted stock and restricted stock units (“RSUs”) expense	1,497		—
Stock grants expense	—		119
Bonus Plan expense (see Note 11)	6,124		—
ESPP expense (see Note 13)	449		—
Total pre-tax expense (1)	$	9,068	$	1,653

(1)As of March 31, 2021 and December 31, 2020, $6,279 and $6,835 remained in Accruals and other current liabilities in the consolidated balance sheets, respectively.

Total stock‑based compensation expense is included in the consolidated statements of operations as follows:


	Three Months Ended
	March 31,
	2021		2020
Cost of subscriptions and licenses	$	89	$	28
Cost of services	243		96
Research and development	3,955		619
Selling and marketing	788		400
General and administrative	3,993		510
Total pre-tax expense	$	9,068	$	1,653

Stock‑based compensation expense is measured at the grant date fair value of the award and is recognized ratably over the requisite service period, which is generally the vesting period. The Company accounts for forfeitures of equity awards as those forfeitures occur.

The fair value of the common stock during periods prior to the IPO was determined by the board of directors at each award grant date based upon a variety of factors, including the results obtained from independent third‑party valuations, the Company’s financial position, and historical financial performance.

Stock Options

The following is a summary of stock option activity and related information under the Company’s applicable equity incentive plans:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Stock	Exercise Price		Contractual	Intrinsic
	Options	Per Share		Life (in years)	Value
Outstanding, December 31, 2020	12,842,226	$	4.87
Exercised	(1,525,331)	4.23
Canceled	(45,250)	5.12
Outstanding, March 31, 2021	11,271,645	$	4.96	1.93	$	473,067
Exercisable, March 31, 2021	6,859,645	$	4.60	1.52	$	290,383

For the three months ended March 31, 2021 and 2020, the Company received cash proceeds of $1,751 and $724, respectively, related to the exercise of stock options. The total intrinsic value of stock options exercised for the three months ended March 31, 2021 and 2020 was $61,267 and $8,143, respectively.

As of March 31, 2021, there was $5,459 of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of approximately 2.7 years.

Acquisition Options — In addition to stock options granted under the Company’s equity incentive plans, in connection with an acquisition completed in March 2018, the Company issued to certain selling shareholder entities options to acquire an aggregate of up to 900,000 shares of Class B Common Stock. The options have a five‑year term, are exercisable on the fourth anniversary of the closing of the acquisition, and have an initial exercise price of $6.805 per share. The options had a four‑year service condition, which terminated automatically upon the completion of the IPO, and therefore, total stock‑based compensation expense associated with these options was fully recognized as of September 30, 2020. The exercise price of the options is subject to a cap and collar adjustment mechanism that automatically reduces (but not to less than $0.01) or increases the exercise price based on the difference between the exercise price and the fair market value of the Company’s Class B Common Stock on the exercise date. As of March 31, 2021, all options to acquire 900,000 shares remain outstanding. As of March 31, 2021, these options are non‑exercisable and have an aggregate intrinsic value of $7,992.

Restricted Stock and RSUs

Under the equity incentive plans, the Company may grant both time‑based and performance‑based shares of restricted Class B Common Stock and RSUs to eligible colleagues. Time‑based awards generally vest ratably on each of the first four anniversaries of the grant date. Performance‑based awards vesting is determined by the achievement of certain business profitability and growth targets, which include growth in annual recurring revenues, as well as actual bookings for perpetual licenses and non‑recurring services. Performance targets are set for annual performance periods.

The fair value of restricted stock and RSUs is determined by the product of the number of shares granted and the Company’s common stock price (as described above) on the grant date.

The following is a summary of unvested restricted stock and RSU activity and related information under the Company’s applicable equity incentive plans:


				Time-		Performance-
				Based		Based
		Time-	Performance-	Weighted		Weighted
	Total	Based	Based	Average		Average
	Restricted	Restricted	Restricted	Grant Date		Grant Date
	Stock	Stock	Stock	Fair Value		Fair Value
	and RSUs	and RSUs	and RSUs (2)	Per Share		Per Share
Unvested, December 31, 2020	1,423,715	1,263,193	160,522	$	16.38	$	16.62
Granted	9,000	9,000	—	45.32		—
Vested	(40,695)	(5,765)	(34,930)	19.68		17.53
Canceled	(132,892)	(7,300)	(125,592)	15.48		16.36
Unvested, March 31, 2021 (1)	1,259,128	1,259,128	—	$	16.57	$	—

(1)Includes 43,000 RSUs which are expected to be settled in cash.

(2)Relates to the 2020 annual performance period. Total stock‑based compensation expense associated with these awards was fully recognized as of December 31, 2020.

For the three months ended March 31, 2021, the weighted average grant date fair value of RSUs was $45.32. No RSUs were granted during the three months ended March 31, 2020. No restricted stocks were granted during the three months ended March 31, 2021 and 2020.

In 2016, the Company granted RSUs subject to performance‑based vesting as determined by the achievement of certain business growth targets. Certain colleagues elected to defer delivery of such shares upon vesting. During the three months ended March 31, 2021 and 2020, 10,864 and 9,830 shares, respectively, were delivered to colleagues, and 14 and 124 additional shares, respectively, were earned as a result of dividends. As of March 31, 2021 and December 31, 2020, 20,190 and 31,040 shares, respectively, of these RSUs remained outstanding.

For the three months ended March 31, 2021 and 2020, restricted stock and RSUs were issued net of 14,869 and 26,511 shares, respectively, which were sold back to the Company to settle applicable income tax withholdings of $708 and $121, respectively.

As of March 31, 2021, there was $18,560 of unrecognized compensation expense related to unvested time‑based restricted stock and RSUs, which is expected to be recognized over a weighted average period of approximately 3.2 years. There was no remaining unrecognized compensation expense related to unvested performance‑based restricted stock and RSUs.

Stock Grants

The Company did not grant fully vested shares of Class B Common Stock during the three months ended March 31, 2021. For the three months ended March 31, 2020, the Company granted 10,951 fully vested shares of Class B Common Stock with a fair value of and $119.

ESPP

In accordance with the guidance in ASC 718-50, Compensation—Stock Compensation, the ability to purchase shares of the Company’s Class B Common Stock for 85% of the of the lower of the price of the first day of the offering period or the last day of the offering period (i.e., the purchase date) represents an option and, therefore, the ESPP is a compensatory plan under this guidance.

The fair value of each purchase right under the ESPP was calculated as a sum of its components, which includes the discount, a six‑month call option, and a six‑month put option. The call and put options were valued using the Black‑Scholes option pricing model. Stock‑based compensation expense is recognized ratably over the six‑month offering period.

Equity Awards Subsequent to March 31, 2021

In April 2021, the Company granted 493,808 time‑based and 99,808 performance‑based RSUs. Time‑based vesting is generally ratably on each of the first four anniversaries of the grant date. Performance‑based vesting is determined by the achievement of certain business profitability and growth targets, which include growth in annual recurring revenues, as well as actual bookings for perpetual licenses and non‑recurring services, and certain non‑financial performance targets. Performance targets are set for annual performance periods ended on December 31, 2021. The unrecognized compensation expense related to these RSUs is approximately $30,000, which is expected to be recognized over a weighted average period of approximately 3.5 years.