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Stock-based Compensation | 12 Months Ended
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Dec. 31, 2022
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Share-based Compensation |
1 4. | STOCK-BASED COMPENSATION
Equity Incentive Plans In May 2021, the Board adopted, and the stockholders approved, the 2021 Equity Incentive Plan (the "2021 Plan") with the purpose of granting stock-based awards, including stock options, stock appreciation rights, RSAs, RSUs, performance awards and other forms of awards, to employees, directors, and consultants. A total of 30,962,615 shares of common stock were authorized for issuance under the 2021 Plan in May 2021. The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to (i) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or (ii) a lesser number of shares determined by the Board prior to the applicable January 1. Accordingly, on January 1, 2022, the number of shares of common stock that may be issued under the 2021 Plan increased by an additional 6,702,346 shares. As a result, as of December 31, 2022, a total of 37,664,961 shares of common stock are authorized for issuance under the 2021 Plan. As of December 31, 2022, a total of 28,427,078 shares of common stock were available for issuance under the 2021 Plan. No stock options have been issued under the 2021 Plan. In June 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”), which was amended in April 2020 to increase the number of shares of common stock authorized for issuance. The 2014 Plan provided for the issuance of incentive and non-statutory stock options to purchase common shares and the grant of other common stock awards to employees, officers, directors, and consultants of the Company. The 2014 Plan served as the successor to the Company’s 2012 Incentive Plan (the “2012 Plan”) and 2004 Equity Incentive Plan (the “2004 Plan”). On the date the Company adopted the 2014 Plan, any options issued and outstanding under the 2012 and 2004 Plans were substituted by options with identical terms to purchase the Company’s common stock under the 2014 Plan. On the date the 2021 Plan was adopted, no further shares could be issued under the 2014 Plan; however, all shares outstanding under the 2014 Plan remain subject to the terms of the 2014 Plan. Options issued under the 2014 Plan generally are exercisable for periods not to exceed 10 years and generally vest over a four to five-year period. The Company issues new shares upon exercise of stock-based awards. Stock options No stock options were granted during the periods presented. The following table summarizes the stock option activity during the year ended December 31, 2022 (aggregate intrinsic value in thousands):
|  |  |  |  |  |  |  |  |  | Weighted- |  |  |  |  |
|  |  |  |  |  | Weighted- |  |  | Average |  |  |  |  |
|  |  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  | Number of Shares |  |  | Exercise Price |  |  | Contractual Life |  |  | Intrinsic Value |
Outstanding at December 31, 2021 |  |  | 7,642,690 |  |  | $ | 12.98 |  |  |  | 6.1 |  |  | $ | 511,979 |
Exercised |  |  | (1,716,286 | ) |  |  | 13.00 |  |  |  |  |  |  |  | 75,066 |
Canceled/Forfeited |  |  | (202,632 | ) |  |  | 22.02 |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2022 |  |  | 5,723,772 |  |  |  | 12.65 |  |  |  | 5.2 |  |  |  | 197,620 |
Exercisable at December 31, 2022 |  |  | 5,491,335 |  |  | $ | 12.20 |  |  |  | 5.1 |  |  | $ | 192,073 |
As of December 31, 2022, the total unrecognized stock-based compensation cost for unvested stock options was $1.8 million, which is expected to be recognized over a weighted-average period of 0.4 years. As of December 31, 2021, the total unrecognized stock-based compensation cost for unvested stock options was $12.2 million, which was expected to be recognized over a weighted-average period of 1.1 years. Restricted stock units In 2018, the Company began issuing RSUs to certain employees, officers, directors, and consultants. The RSUs granted prior to the Company’s IPO vested upon the satisfaction of both a service and a performance condition, if both conditions are met before the award’s expiration date. For certain awards, the performance condition was satisfied solely on the effective date of a registration statement for the Company’s IPO, and for other awards, the performance condition was satisfied on the earlier of either the effective date of a registration statement for the Company’s IPO or a change in control. RSUs granted with service vesting conditions generally vest over four years on either a quarterly or annual vesting schedule. Prior to its IPO, given the Company’s common stock was not publicly traded, the grant date fair value of RSUs was determined based upon the fair value of the Company’s common stock. The Board exercised significant judgment in determining the fair value of the Company’s common stock with input from management, based on several objective and subjective factors. Factors considered by the Board included the price paid by investors for the Company’s common and preferred stock, actual and forecasted operating and financial performance, market conditions, performance of comparable publicly traded companies and transactions of comparable companies, developments and milestones within the Company, the rights, preferences, and privileges of its common and preferred stock, the likelihood of achieving a liquidating event, and the results of contemporaneous third-party valuations. The fair value was determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants, Valuation of Privately Held Company Equity Securities Issued as Compensation. Subsequent to the completion of the Company’s IPO in May 2021, the fair value of RSUs was determined based on the trading price of its publicly traded common stock. The grant date fair value of RSUs granted during 2022, 2021, and 2020 was $326.4 million, $350.6 million, and $132.4 million, respectively. Prior to the effective date of the registration statement for the Company’s IPO, achievement of the performance conditions was not probable. Upon the effective date of the registration statement for the Company’s IPO, the performance vesting condition for all RSUs granted was satisfied and the Company recognized on a graded vesting basis a cumulative catch-up stock-based compensation adjustment of $115.3 million in its consolidated statement of operations and comprehensive loss for the portion of the service period satisfied from the grant date through the effective date of the registration statement. Substantially all of the RSUs granted subsequent to the Company’s IPO vest based solely on continued service, which is generally over four years. The intrinsic value of RSUs vested during the years ended December 31, 2022 and 2021 was $156.9 million and $187.7 million, respectively. As of December 31, 202 2, the total unrecognized stock-based compensation cost for all RSUs outstanding at that date was $399.3 million, which is expected to be recognized over a weighted-average vesting period of 2.5 years. As of December 31, 202 1, the total unrecognized stock-based compensation cost for all RSUs outstanding at that date was $281.0 million, which was expected to be recognized over a weighted-average vesting period of 2.0 years. The following table summarizes the RSU activity during the year ended December 31, 2022:
|  | Number of Shares |  |  | Weighted-Average Grant Date Fair Value |
Unvested at December 31, 2021 |  |  | 6,622,684 |  |  | $ | 59.72 |
Granted |  |  | 5,859,110 |  |  |  | 55.71 |
Vested |  |  | (2,845,174 | ) |  |  | 57.14 |
Canceled/Forfeited |  |  | (1,141,322 | ) |  |  | 58.80 |
Unvested at December 31, 2022 |  |  | 8,495,298 |  |  | $ | 57.94 |
Restricted stock awards In November 2021, the Company issued 199,670 RSAs to certain key employees in connection with the acquisition of Levelset that vest based on their continued service over a two-year period. The fair value of the RSAs issued was $95.05 per share, which was the closing trading stock price of the Company’s common stock on the acquisition date. These shares are released from restriction quarterly over a two-year period assuming the continued service of the employees. As of December 31, 2022, 99,833 shares have vested. As of December 31, 2021, no shares had vested. During 2022 and 2021, the Company recognized stock-based compensation expense of $9.5 million and $1.6 million, respectively, relating to these shares. In July 2019, the Company issued 205,464 restricted Series H-1 redeemable convertible preferred stock awards (“Series H-1 RSAs”) to certain employees at a grant date fair value of $26.75 in connection with the acquisition of Honest Buildings, Inc. These shares were released from restriction 50% on the first anniversary and 50% on the second anniversary of the acquisition date based on the continued service of the employees. Upon the closing of the Company’s IPO, the Series H-1 RSAs automatically converted into shares of restricted common stock on a one-for-one basis. As of December 31, 2021, all of the Series H-1 RSAs were fully vested. During the year ended December 31, 2021 and 2020, the Company recognized stock-based compensation expense of $1.6 million and $2.7 million, respectively, for these shares. Sales of common stock During the year ended December 31, 2021, certain of the Company’s investors acquired outstanding common stock from the Company’s employees. For the shares acquired at a price in excess of the estimated fair value of the Company’s common stock, the Company recorded stock-based compensation expense of $5.5 million for the period from January 1, 2021 through the Company’s IPO on May 20, 2021 for the difference between the price paid by the investors and the estimated fair value on the date of the transactions. Employee Stock Purchase Plan In May 2021, the Board adopted, and the stockholders approved, the ESPP, which became effective immediately prior to the effective date of the Company's IPO. A total of 2,600,000 shares of common stock were initially reserved for issuance under the ESPP. The number of shares of the Company’s common stock reserved for issuance under the ESPP automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year; and (ii) 3,900,000 shares, except before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii). Accordingly, on January 1, 2022, the number of shares of common stock reserved under the 2021 ESPP increased by an additional 1,340,469 shares. The offering periods are scheduled to start in May and November of each year. The first offering period commenced on the Company’s first day of trading on May 20, 2021 and comprised three purchase periods of approximately six months in length. The ESPP provides for consecutive offering periods that will typically have a duration of 12 months in length and comprise two purchase periods of six months in length, subject to reset and rollover provisions. The ESPP provides eligible employees with an opportunity to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible compensation, subject to a maximum of $25,000 of stock per calendar year. A participant may purchase a maximum of 2,500 shares of common stock during a purchase period. Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each six-month purchase period. The purchase price of the shares shall be 85% of the lower of the fair market value of the common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the related offering period. However, in the event the fair value of the common stock on the purchase date is lower than the fair value on the first trading day of the offering period, the offering period is terminated immediately following the purchase and a new offering period begins the following day. Participants may end their participation at any time prior to the last 15 days of a purchase period and will be repaid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment. The fair value of the ESPP purchase rights on the date of grant using the Black-Scholes option pricing model was estimated using the following assumptions:
|  | December 31,
|  | 2022 |  | 2021
Risk-free interest rate |  | 1.47% to 4.55% |  | 0.03% to 0.18%
Expected term (in years) |  | 0.5 to 1.0 |  | 0.5 to 1.5
Estimated dividend yield |  | 0.00% |  | 0.00%
Estimated weighted-average volatility |  | 61.14% to 72.69% |  | 44.81% to 69.39%
The term for the ESPP purchase rights is the offering period. The Company estimates volatility using historical volatilities of a group of public companies in a similar industry and stage of life cycle, selected by management, for a period commensurate with the term. The interest rate is derived from government bonds with a similar term to the ESPP purchase right granted. The Company has not declared, nor does it expect to declare, dividends in the foreseeable future. Consequently, an expected dividend yield of zero was utilized. The fair value of the Company’s common stock used to value ESPP purchase rights is based on the trading price of its publicly traded common stock. Employee payroll contributions accrued in connection with the ESPP were $4.7 million and $4.5 million as of December 31, 2022 and 2021, respectively, and are included within accrued expenses in the accompanying consolidated balance sheets. Employee payroll contributions ultimately used to purchase shares will be reclassified to stockholders' equity on the purchase date. Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period. During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation of $15.0 million and $8.5 million, respectively, in connection with the ESPP. During the years ended December 31, 2022 and 2021, 551,753 and 166,370 shares of the Company’s common stock were purchased under the ESPP, respectively. As of December 31, 2022, unrecognized stock-based compensation expense related to the ESPP was $4.5 million, which is expected to be recognized over a weighted-average period of 0.4 years. As of December 31, 2021, unrecognized stock-based compensation expense related to the ESPP was $13.8 million, which was expected to be recognized over a weighted-average period of 0.6 years. Stock-based compensation The Company recorded total stock-based compensation cost from stock options, RSUs, ESPP, RSAs, and sales of stock by employees in excess of fair value as follows (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Cost of revenue |  | $ | 7,253 |  |  | $ | 8,094 |  |  | $ | 1,722 |
Sales and marketing |  |  | 53,397 |  |  |  | 68,755 |  |  |  | 13,385 |
Research and development |  |  | 63,262 |  |  |  | 85,040 |  |  |  | 12,930 |
General and administrative |  |  | 38,974 |  |  |  | 65,272 |  |  |  | 15,923 |
Total stock-based compensation expense |  | $ | 162,886 |  |  | $ | 227,161 |  |  | $ | 43,960 |
Stock-based compensation capitalized for software development and cloud-computing arrangement implementation costs |  |  | 8,818 |  |  |  | 5,247 |  |  |  | 575 |
Total stock-based compensation cost |  | $ | 171,704 |  |  | $ | 232,408 |  |  | $ | 44,535 |
There were no net tax benefits recognized in the accompanying consolidated statements of operations and comprehensive loss for stock-based compensation arrangements for the years ended December 31, 2022, 2021, and 2020 due to the Company having a full valuation allowance against its deferred tax assets.

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