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Stockholders' Equity | 12 Months Ended
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Dec. 31, 2019
Equity [Abstract] |
Stockholders' Equity | 11. STOCKHOLDERS’ EQUITY Preferred Stock The Company has 10 million shares of undesignated preferred stock authorized but not issued with rights and preferences determined by the Company’s Board of Directors at the time of issuance of such shares. As of December 31, 2019 and 2018, there were no shares of preferred stock issued and outstanding. Common Stock The Company has two classes of authorized common stock, Class A common stock and Class B common stock. Holders of Class A common stock are entitled to one vote for each share of Class A common stock held on all matters submitted to a vote of stockholders and holders of Class B common stock are entitled to ten votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Except with respect to voting, the rights of the holders of Class A and Class B common stock are identical. Shares of Class B common stock are voluntarily convertible into shares of Class A common stock at the option of the holder and are generally automatically converted into shares of the Company's Class A common stock upon sale or transfer. Shares issued in connection with exercises of stock options, vesting of restricted stock units, or shares purchased under the employee stock purchase plan are generally automatically converted into shares of the Company’s Class A common stock. Shares issued in connection with an exercise of the common stock warrants are converted into shares of the Company’s Class B common stock. At-the-Market Offerings On March 12, 2019, the Company entered into an Equity Distribution Agreement with Citigroup Global Markets Inc., as its sales agent (the “Citi Equity Distribution Agreement”), pursuant to which the Company could issue and sell from time-to-time shares of its Class A common stock for aggregate gross proceeds of up to $100.0 million. In March 2019, the Company sold approximately 1.4 million shares of Class A common stock at an average selling price of $72.00 per share, constituting all available shares for sale under the Citi Equity Distribution Agreement for aggregate gross proceeds of $100.0 million and incurred issuance costs of $2.0 million. On May 16, 2019, the Company entered into an Equity Distribution Agreement with Morgan Stanley & Co. LLC, as its sales agent (the “MS Equity Distribution Agreement”), pursuant to which the Company could issue and sell up to an aggregate of 1.0 million shares of its Class A common stock. In May 2019, the Company sold all 1.0 million available shares for sale under the MS Equity Distribution Agreement at an average selling price of $82.90 per share, for aggregate gross proceeds of $82.9 million and incurred issuance costs of $1.6 million. On November 19, 2019, the Company entered into another Equity Distribution Agreement with Citigroup Global Markets Inc. as its sales agent (the “Citi Equity Distribution Agreement – 2”), pursuant to which the Company could issue and sell from time-to-time up to an aggregate of 1.0 million shares of its Class A common stock. In November 2019, the Company sold all 1.0 million shares available for sale under the Citi Equity Distribution Agreement – 2 at an average selling price of $153.99 per share for aggregate gross proceeds of $153.99 million and incurred issuance costs of $2.8 million. Common Stock Reserved For Issuance At December 31, 2019, the Company had reserved shares of common stock for issuance as follows (in thousands):
|  | As of December 31, 2019 |
Common stock awards granted under equity incentive plans |  |  | 15,668 |
Common stock awards available for issuance under the 2017 Employee Stock Purchase Plan * |  |  | 2,089 |
Common stock awards available for issuance under the 2017 Equity Incentive Plan |  |  | 16,950 |
Total reserved shares of common stock |  |  | 34,707 |
* The Company has not issued any common stock pursuant to the 2017 Employee Stock Purchase Plan. Equity Incentive Plans The Company has two equity incentive plans, the 2008 Equity Incentive Plan (the “2008 Plan”) and the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan became effective September 2017 in connection with the IPO. No further shares have been issued under the 2008 Plan. The 2017 Plan provides for the grant of incentive stock options to the Company’s employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity compensation to the Company’s employees, directors and consultants. Restricted stock units granted under the plan are subject to continuous service. Options granted under the plans are granted at a price per share equivalent to the fair market value on the date of grant. Recipients of option grants who possess more than 10% of the combined voting power of the Company (a “10% Shareholder”) are subject to certain limitations, and incentive stock options granted to such recipients are at a price no less than 110% of the fair market value at the date of grant. Restricted Stock Units Restricted stock unit activity for the year ended December 31, 2019 is as follows (in thousands, except per share data):
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value Per Share |
Balance, December 31, 2018 |  |  | 3,686 |  |  | $ | 48.50 |
Awarded |  |  | 2,228 |  |  |  | 87.60 |
Released |  |  | (822 | ) |  |  | 49.26 |
Forfeited |  |  | (548 | ) |  |  | 50.40 |
Balance, December 31, 2019 - outstanding |  |  | 4,544 |  |  | $ | 67.30 |
The grant-date fair value of restricted stock units granted during the year ended December 31, 2019 was $195.2 million. Total unrecognized compensation cost related to restricted stock units awarded to employees as of December 31, 2019 was $267.7 million, which the Company expects to recognize over 2.77 years. The intrinsic value of restricted stock units that vested in the years ended December 31, 2019 and 2018 was $100.1 million and $12.7 million, respectively, which represented the fair value of the Company’s common stock underlying the restricted stock units on their vesting date. Stock options The following table summarizes the Company’s stock option activities under the 2008 Plan and 2017 Plan (in thousands, except per share data):
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life (Years) |  |  | Weighted Average Grant Date Fair Value Per Share |  |  | Aggregate Intrinsic Value |
Balance, December 31, 2018 |  |  | 16,371 |  |  | $ | 8.59 |  |  |  | 6.8 |  |  |  | — |  |  |  |  |
Granted |  |  | 572 |  |  |  | 100.06 |  |  |  | — |  |  | $ | 39.23 |  |  |  |  |
Exercised |  |  | (5,352 | ) |  |  | 5.35 |  |  |  | — |  |  |  | — |  |  |  |  |
Forfeited and expired |  |  | (467 | ) |  |  | 8.77 |  |  |  | — |  |  |  | — |  |  |  |  |
Balance, December 31, 2019 - outstanding |  |  | 11,124 |  |  | $ | 14.84 |  |  |  | 6.2 |  |  |  | — |  |  | $ | 1,324,461 |
Options exercisable at December 31, 2019 |  |  | 6,603 |  |  | $ | 5.84 |  |  |  | 5.1 |  |  |  | — |  |  | $ | 845,590 |
The weighted average grant-date fair value of stock options granted during the years ended December 31, 2019, 2018 and 2017 was $39.23, $22.96 and $3.73, respectively. The total intrinsic value of stock options exercised in the years ended December 31, 2019, 2018 and 2017 was $474.2 million, $445.9 million and $20.4 million, respectively, and represents the difference between the fair value of the Company’s common stock at the dates of exercise and the exercise price of the options. As of December 31, 2019, the Company had $41.2 million of unrecognized stock compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of approximately 1.78 years. Stock-based Compensation The Company measures the cost of employee services received in exchange for an equity award based on the grant date fair value of the award. Generally, stock options granted to employees vest 25% after one year and then 1/48th monthly thereafter and have a term of ten years, and restricted stock units issued generally vest 25% after one year and then 1/16th quarterly thereafter. The following table shows total stock-based compensation expense included in the accompanying Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 (in thousands):
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Cost of platform revenue |  | $ | 342 |  |  | $ | 97 |  |  | $ | 81 |
Cost of player revenue |  |  | 1,072 |  |  |  | 469 |  |  |  | 145 |
Research and development |  |  | 40,036 |  |  |  | 18,538 |  |  |  | 4,714 |
Sales and marketing |  |  | 24,179 |  |  |  | 10,459 |  |  |  | 2,817 |
General and administrative |  |  | 19,546 |  |  |  | 8,111 |  |  |  | 3,196 |
Total stock-based compensation |  | $ | 85,175 |  |  | $ | 37,674 |  |  | $ | 10,953 |
The fair value of options granted under the 2008 Plan and 2017 Plan is estimated on the grant date using the Black-Scholes option-valuation model. This valuation model for stock-based compensation expense requires the Company to make certain assumptions and judgments about the variables used in the calculation, including the expected term, the expected volatility of the Company’s common stock, an assumed risk-free interest rate, and expected dividends. The Company recognizes forfeitures as they occur. Fair Value of Common Stock: Prior to our IPO, the fair value of the common stock underlying our stock options was determined by our Board of Directors. The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our Board of Directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock at each grant date, including but not limited to the prices, rights, preferences and privileges of our preferred stock relative to the common stock, our operating and financial performance, current business conditions and projections, our stage of development, likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an IPO or sale of our company, given prevailing market conditions, any adjustment necessary to recognize a lack of marketability of the common stock underlying the granted options, the market performance of comparable publicly-traded companies, the U.S. and global capital market conditions. Subsequent to our IPO, the Company uses the market closing price for our Class A common stock as reported on The Nasdaq Global Select Market on the date of grant. The Company uses the straight-line method for expense recognition. Expected Term: The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined based on the simplified method as described in ASC Topic 718-10-S99-1, SEC Materials SAB Topic 14, Share-Based Payment. Expected Volatility: The Company’s volatility factor is estimated using several comparable public company volatilities for similar option terms. Expected Dividends: The Company has never paid cash dividends and has no present intention to pay cash dividends in the future, and as a result, the expected dividends are $0. Risk-Free Interest Rate: The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equivalent to the estimated life of the stock-based awards. Where the expected term of the Company’s stock-based awards does not correspond with the term for which an interest rate is quoted, the Company performs a straight-line interpolation to determine the rate from the available term maturities. The assumptions used to value stock-based awards granted during the years ended December 31, 2019, 2018 and 2017 are as follows:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Dividend rate |  |  | — |  |  |  | — |  |  |  | — |
Expected term (in years) |  | 5.0 - 6.7 |  |  | 5.3 - 6.8 |  |  | 5.3 - 6.5 |
Risk-free interest rate |  | 1.35 - 2.56% |  |  | 2.32 - 2.88% |  |  | 1.87 - 2.25% |
Expected volatility |  | 35 - 36% |  |  | 38 - 40% |  |  | 39 - 44% |
Fair value of common stock |  |  | — |  |  |  | — |  |  | $2.56 - $18.46 |
Stock Warrants The Company does not have any outstanding warrants as of December 31, 2019 and 2018. In July 2017 the Company issued 0.4 million shares of Class B common stock upon exercise of 0.4 million Class B common stock warrants issued in 2009. Immediately prior to the Company’s IPO in 2017, warrants to purchase 2.2 million shares of convertible preferred stock were outstanding. The warrants were automatically converted into warrants to purchase 2.2 million shares of Class B common stock upon the closing of the IPO. The fair value of the convertible preferred stock warrants was recorded as a liability and was remeasured at the end of each balance sheet date using the Black-Scholes option pricing model. The Company revalued the convertible preferred stock warrants as of the completion of the IPO and reclassified the outstanding preferred stock warrant liability balance to additional paid-in capital with no further re-measurement required as Class B common stock warrants are considered permanent equity. Changes in the fair value of the convertible preferred stock warrants were recognized in the consolidated statements of operations. The Company valued the convertible preferred stock warrants using the following assumptions:
|  | Year Ended |
|  | December 31, 2017 |
Dividend rate |  |  | — |
Expected term (in years) |  | 3.0 - 9.7 |
Risk-free interest rate |  | 1.5 - 2.3% |
Expected volatility |  | 44 - 51% |
After conversion into warrants to purchase shares of Class B common stock, 1.9 million warrants were exercised and 0.1 million shares were cancelled during the year ended December 31, 2017. The warrant agreements allowed for net settlement for Class B common stock. As a result, the Company issued 1.8 million shares of Class B common stock upon exercise. As of December 31, 2017, warrants to purchase 0.2 million shares of Class B common stock were outstanding, which were exercised during the year ended December 31, 2018.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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