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Stock-based Compensation | 6 Months Ended
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Jun. 30, 2024
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION 2021 Equity Incentive Plan In May 2021, the Company’s board of directors (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, restricted stock awards (“RSAs”), RSUs, PSUs, and other forms of awards, to employees, directors, and consultants. As of December 31, 2023, a total of 44,622,937 shares of common stock were authorized for issuance under the 2021 Plan. 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 either (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, 2024, the number of shares of common stock that may be issued under the 2021 Plan increased by an additional 7,240,323 shares. As a result, as of June 30, 2024, a total of 51,863,260 shares of common stock are authorized for issuance under the 2021 Plan. As of June 30, 2024, a total of 34,958,638 shares of common stock were available for issuance under the 2021 Plan. No stock options have been issued under the 2021 Plan. Stock options No stock options were granted during the periods presented. The following table summarizes the stock option activity during the six months ended June 30, 2024:
| Number of Shares |  | Weighted- Average Exercise Price
Outstanding at December 31, 2023 | 4,340,052 |  | $ | 12.57 |
Exercised | (766,211) |  | 12.95 |
Canceled/Forfeited | (750) |  | 19.16 |
Outstanding at June 30, 2024 | 3,573,091 |  | 12.48 |
Exercisable at June 30, 2024 | 3,573,091 |  | $ | 12.48 |
As of June 30, 2024, there is no unrecognized stock-based compensation cost for stock options previously granted by the Company. Restricted stock units Service-based restricted stock units In 2018, the Company began issuing RSUs to certain employees, officers, non-employee consultants, and directors. Other than as described below, all of the RSUs granted subsequent to the Company’s initial public offering (“IPO”) vest based solely on continued service, which is generally over four years, on either a quarterly or annual vesting schedule. The following table summarizes the RSU activity during the six months ended June 30, 2024:
| Number of Shares |  | Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2023 | 7,382,073 |  | $ | 59.35 |
Granted | 2,835,307 |  | 78.88 |
Vested | (1,829,526) |  | 58.65 |
Canceled/Forfeited | (622,194) |  | 64.36 |
Outstanding at June 30, 2024 | 7,765,660 |  | $ | 66.30 |
As of June 30, 2024, the total unrecognized stock‑based compensation cost for all RSUs outstanding was $482.2 million, which is expected to be recognized over a weighted‑average vesting period of 2.7 years. Performance-based restricted stock units Beginning in 2022, the Company granted PSUs to certain non-executive employees with vesting terms based on the achievement of certain operating performance goals. In March 2024, the Company granted its CEO an aggregate target number of 46,986 PSUs (the “CEO PSUs”) that will vest (if at all) over a three-year period, subject to the achievement of certain financial performance goals and continued service through the applicable vesting date. The actual number of CEO PSUs that become eligible to vest will be determined based on the attainment level of the applicable performance goal, as certified by the Compensation Committee of the Board. A target number of 35,239 CEO PSUs (75% of the CEO PSUs) will become eligible to vest based on the attainment level of a revenue performance goal for fiscal year 2024, which was set at the beginning of fiscal year 2024, with a payout range of 0% to 200% of target. A target number of 11,747 CEO PSUs (25% of the CEO PSUs) will become eligible to vest based on the attainment of a non-GAAP operating margin performance goal for fiscal year 2024, which was set at the beginning of fiscal year 2024, with a payout range of 0% to 150% of target. One third of the CEO PSUs that become eligible to vest will vest on February 20, 2025 (or a subsequent quarterly vesting date, to the extent the number of CEO PSUs eligible to vest have not been certified by such date). The remaining CEO PSUs that become eligible to vest will vest in substantially equal installments quarterly over the two years following February 20, 2025. The Company recognizes compensation expense for PSUs in the period in which it becomes probable that the underlying performance target will be achieved. Compensation expense for awards that contain performance conditions is calculated using the graded vesting method and the portion of expense recognized in any period may fluctuate depending on changing estimates of the achievement of the performance conditions. The following table summarizes the PSU activity during the six months ended June 30, 2024:
| Number of Shares |  | Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2023 | 77,971 |  | $ | 55.63 |
Granted (1) | 112,255 |  | 74.49 |
Outstanding at June 30, 2024 | 190,226 |  | $ | 66.76 |
(1) This represents awards granted at 100% attainment of the performance conditions. As of June 30, 2024, the total unrecognized stock‑based compensation cost for all PSUs outstanding was $7.3 million, which is expected to be recognized over a weighted‑average vesting period of 1.6 years. 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 June 30, 2024 and December 31, 2023, all shares had vested, as such there was no stock-based compensation expense recognized during the six months ended June 30, 2024. During the six months ended June 30, 2023, the Company recognized stock-based compensation expense of $7.1 million, including $5.3 million related to RSAs whose vesting was accelerated upon the departure of certain employees. During the six months ended June 30, 2023, the Company also expensed $3.4 million related to the accelerated vesting of cash retention amounts upon such employees’ departure. Employee Stock Purchase Plan In May 2021, the Board adopted, and the stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effective date of the Company’s IPO. As of December 31, 2023, a total of 5,332,064 shares of common stock had been 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, 2024, the number of shares of common stock reserved under the ESPP increased by an additional 1,448,064 shares. The offering periods are scheduled to start in May and November of each year. 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 will 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 during the six months ended June 30, 2024:
Risk-free interest rate | 5.04% to 5.33%
Expected term (in years) | 0.5 to 1.0
Estimated dividend yield | 0.00%
Estimated weighted-average volatility | 29.90% to 39.27%
The term of the ESPP purchase rights is the offering period. Beginning in the fourth quarter of 2023, the Company estimates volatility for ESPP purchase rights based on the historical volatility of its own common stock price. Prior to that, given the Company’s limited trading history, the Company estimated volatility using the historical volatilities of a group of public companies in a similar industry and stage of life cycle, selected by management, in addition to considering the Company’s own historical volatility, for a period commensurate with the term of the ESPP purchase rights. 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 $4.6 million and $5.0 million as of June 30, 2024 and December 31, 2023, respectively, and are included within accrued expenses on the accompanying condensed 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 six months ended June 30, 2024 and 2023, the Company recognized stock-based compensation expense of $4.6 million and $4.7 million, respectively, in connection with the ESPP. During the six months ended June 30, 2024 and 2023, 276,349 and 316,042 shares of the Company’s common stock were purchased under the ESPP, respectively. As of June 30, 2024, unrecognized stock-based compensation expense related to the ESPP was $7.0 million, which is 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, PSUs, RSAs, and the ESPP as follows (in thousands):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Cost of revenue | $ | 2,126 |  |  | $ | 1,927 |  |  | $ | 3,936 |  |  | $ | 3,578 |
Sales and marketing | 15,569 |  |  | 14,411 |  |  | 28,484 |  |  | 27,471 |
Research and development | 17,620 |  |  | 16,269 |  |  | 31,346 |  |  | 36,048 |
General and administrative | 13,910 |  |  | 9,880 |  |  | 25,591 |  |  | 20,328 |
Total stock-based compensation expense | $ | 49,225 |  |  | $ | 42,487 |  |  | $ | 89,357 |  |  | $ | 87,425 |
Stock-based compensation capitalized for software development and cloud-computing arrangement implementation costs | 3,496 |  |  | 2,161 |  |  | 5,954 |  |  | 4,283 |
Total stock-based compensation cost | $ | 52,721 |  |  | $ | 44,648 |  |  | $ | 95,311 |  |  | $ | 91,708 |

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