Equity Awards and Instruments

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Effective September 22, 2020, the Company adopted and approved the 2020 Incentive Award Plan. The 2020 Incentive Award Plan provides for the granting of stock, stock options, restricted stock, RSUs, and other stock‑based or performance‑based awards to certain directors, officers, colleagues, consultants, and advisors of the Company. The 2020 Incentive Award Plan provides that the total number of shares of Class B Common Stock that may be issued under the 2020 Incentive Award Plan is 25,000,000 (the “Absolute Share Limit”). Effective December 31, 2021, the board of directors amended the 2020 Incentive Award Plan to eliminate a provision that automatically increased the Absolute Share Limit on the first day of each fiscal year in an amount equal to the lower of 1% of the total number of shares of Class B Common Stock outstanding on the last day of the immediately preceding fiscal year and a lower number of shares of Class B Common Stock as determined by the Company’s board of directors. For fiscal year 2021, the board of directors determined that the increase to the Absolute Share Limit would be set at zero. The 2020 Incentive Award Plan terminates in September 2030. Equity awards that are expired, canceled, forfeited, or terminated for any reason will be available for future grant under the 2020 Incentive Award Plan. As of December 31, 2021, equity awards available for future grants under the 2020 Incentive Award Plan were 24,073,298.

The Company also has equity awards outstanding under its 2015 Equity Incentive Plan, which provided for the granting of awards in the form of stock options, stock appreciation rights, dividend equivalent rights, restricted stock, RSUs, and stock grants. The 2015 Equity Incentive Plan had 50,000,000 shares of Class B Common Stock reserved for issuance and terminates in November 2024. Following the completion of the IPO, no further awards may be granted under the 2015 Equity Incentive Plan.

Equity Awards

Stock Options

Stock options generally vest ratably on each of the first four anniversaries of the grant date. Prior to the IPO, stock options granted under the 2015 Equity Incentive Plan included Put and Call provisions that allowed colleagues who have exercised an option to sell all or part of their shares acquired upon such exercise to the Company at the fair market value at the time of the sale. The exercise period for the Put right began on the second day after the six‑month anniversary of the date the option was exercised and ended after an additional 30 days. The Call right provision allowed the Company to purchase all or a part of the shares acquired by a colleague upon exercise of an option, at the fair market value at the time of such purchase. The Company could exercise the Call right at any time within seven months of the later of i) the optionee’s termination of service with the Company, or ii) the optionee’s (or his or her beneficiary’s) exercise of such option after a termination of service. These Put and Call rights terminated upon the completion of the IPO.

In accordance with the terms of the 2015 Equity Incentive Plan, in connection with the payment of the Special Dividend of $1.50 per share of the Company’s common stock on September 2, 2020, the Company equitably reduced the exercise price of each outstanding stock option granted under the 2015 Equity Incentive Plan by $1.50, but not lower than $0.01 (see Note 1).

Stock Grants

Under the equity incentive plans, the Company may grant unrestricted, fully vested shares of Class B Common Stock to eligible colleagues. Prior to the IPO, any such shares awarded had Put and Call rights similar to those described above with respect to stock options, which terminated upon the completion of the IPO.

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 annualized 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.

Shares of restricted stock have voting rights and, subject to the terms of the award agreements, the time‑based restricted stock awards generally accrue declared dividends which are paid upon vesting. RSUs, which may be cash or share‑settled depending on the award, do not have voting rights, but, subject to the terms of the award agreements, generally accrue declared dividends which are paid upon vesting. Beginning with the April 2021 grant, time‑based RSUs have dividend equivalent rights and do not accrue cash dividends. Certain historical RSUs granted in 2016 under the Company’s 2015 Equity Incentive Plan have dividend equivalent rights and do not accrue cash dividends. Recipients of the Company’s outstanding performance‑based restricted stock awards and RSUs are paid dividends prior to vesting.

Stock-Based Compensation Expense

Total stock‑based compensation expense was as follows:


	Year Ended December 31,
	2021		2020		2019
Bonus Plan expense (see Note 11)	$	23,121	$	6,524	$	—
Restricted stock and RSUs expense (1)	19,917		4,248		1,749
Stock option expense	3,271		6,858		6,342
ESPP expense (see Note 13)	2,118		—		—
Stock grants expense	445		319		—
DCP elective participant deferrals expense (2) (see Note 12)	173		—		—
IPO vested restricted stock and RSU expense	—		15,102		—
Total stock-based compensation expense (3)	$	49,045	$	33,051	$	8,091

(1)Includes acquisition‑related shares (see Note 4).

(2)DCP elective participant deferrals expense excludes deferred incentive bonus payable pursuant to the Bonus Plan.

(3)As of December 31, 2021 and 2020, $6,749 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:


	Year Ended December 31,
	2021		2020		2019
Cost of subscriptions and licenses	$	1,442	$	960	$	115
Cost of services	1,257		2,939		522
Research and development	19,740		12,105		3,107
Selling and marketing	5,980		6,692		2,210
General and administrative	20,626		10,355		2,137
Total stock-based compensation expense	$	49,045	$	33,051	$	8,091

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 fair value of each stock option award was estimated on the date of grant using the Black‑Scholes option pricing model. The determination of the fair value of share‑based payment awards using an option pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables, which are estimated as follows:

Expected volatility. The expected stock price volatility for the Company’s common stock was estimated by using the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own common stock share price becomes available.

Expected dividend yield. The expected dividend yield is calculated by dividing the Company’s annual dividend, based on the most recent quarterly dividend rate, by the Company’s common stock price (as described above) on the grant date.

Risk‑free interest rate. The risk‑free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the stock options at the time of grant.

Expected term. The expected term represents the period that the Company’s stock‑based awards are expected to be outstanding. The expected term is based on the simplified method, which represents the average period from vesting to the expiration of the award.

The following weighted average assumptions were used in the Black‑Scholes option pricing model to estimate the fair values of stock options granted during the years ended December 31, 2020 and 2019. The Company did not grant stock options during the year ended December 31, 2021.


	Year Ended December 31,
	2020	2019
Expected volatility	31.04%	29.57%
Expected dividend yield	1.11%	1.38%
Risk-free interest rate	1.31%	2.48%
Expected term (in years)	3.75	3.75
Weighted average grant date fair value of stock options issued	$2.49	$1.66

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	(5,653,551)	4.36
Forfeited	(270,750)	5.56
Outstanding, December 31, 2021	6,917,925	$	5.26	1.57	$	297,933
Exercisable, December 31, 2021	3,837,800	$	5.00	1.26	$	166,305

For the years ended December 31, 2021, 2020, and 2019, the Company received cash proceeds of $5,605, $9,128, and $3,612, respectively, related to the exercise of stock options. The total intrinsic value of stock options exercised for the years ended December 31, 2021, 2020, and 2019 was $270,614, $72,275, and $22,914, respectively.

As of December 31, 2021, there was $2,668 of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of approximately 0.9 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 was incorporated into the Company’s Call rights. 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. The fair value of the awards was estimated on the date of grant using the Black‑Scholes option pricing model. The grant date fair value of each option was $3.44. Any shares of Class B Common Stock acquired upon exercise of the options were generally entitled to the Put and Call rights summarized above under “Stock Options,” and the options contain customary adjustment provisions in case of stock splits, stock dividends, or other corporate transactions. Upon the completion of the IPO, the Put and Call provisions, as well as the incorporated service condition, of the Company’s acquisition options terminated automatically and as such, the Company accelerated $1,548 of previously unrecognized stock‑based compensation associated with these options for the year ended December 31, 2020. The Company recorded a total of $2,012 of stock‑based compensation expense associated with these options for the year ended December 31, 2020. As of December 31, 2021, all options to acquire 900,000 shares remain outstanding. As of December 31, 2021, these options are non‑exercisable and have an aggregate intrinsic value of $7,992.

Restricted Stock and RSUs

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		Per Share		Per Share
Unvested, December 31, 2020	1,423,715		1,263,193	160,522	(3)	$	16.38	$	16.62
Granted	894,595	(1)	794,787	99,808	(4)	52.80		49.93
Vested	(399,893)		(364,963)	(34,930)	(3)	21.95		17.53
Forfeited	(209,872)		(81,155)	(128,717)		22.00		17.18
Unvested, December 31, 2021	1,708,545	(2)	1,611,862	96,683	(5)	$	32.81	$	49.93

(1)For the year ended December 31, 2021, the Company granted RSUs only.

(2)Includes 48,927 RSUs which are expected to be settled in cash.

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

(4)Relates to the 2021 annual performance period.

(5)Relates to the 2021 annual performance period. Total stock‑based compensation expense associated with these awards was fully recognized as of December 31, 2021.

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 years ended December 31, 2021 and 2020, 10,864 and 9,831 shares, respectively, were delivered to colleagues, and 45 and 3,030 additional shares, respectively, were earned as a result of dividends. As of December 31, 2021 and 2020, 20,221 and 31,040 shares, respectively, of these vested and deferred RSUs remained outstanding.

The weighted average grant date fair values of restricted stock and RSUs granted were $52.48, $16.03, and $7.24, for the years ended December 31, 2021, 2020, and 2019, respectively.

For the years ended December 31, 2021, 2020, and 2019, restricted stock and RSUs were issued net of 125,825, 339,833, and 54,418 shares, respectively, which were sold back to the Company to settle applicable income tax withholdings of $7,293, $7,951, and $399, respectively.

As of December 31, 2021, there was $46,271 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 2.0 years. There was no remaining unrecognized compensation expense related to unvested performance‑based restricted stock and RSUs.

Stock Grants

The fair value of stock grants is determined by the product of the number of fully vested Class B Common Stock granted and the Company’s common stock price (as described above) on the grant date. The total expense related to stock grants is recognized on the grant date as the issued award is fully vested.

For the years ended December 31, 2021 and 2020, the Company granted 7,824 and 21,956 fully vested shares of Class B Common Stock, respectively, with a fair value of $450 and $319, respectively. The Company did not grant fully vested shares of Class B Common Stock during 2019.

ESPP

In accordance with the guidance in FASB ASC Topic 718-50, Compensation—Stock Compensation - Employee Share Purchase Plans, the ability to purchase shares of the Company’s Class B Common Stock for 85% 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 the 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 respective offering period.