XML 31 R19.htm IDEA: XBRL DOCUMENT
v3.20.2

Stockholders' Equity | 6 Months Ended
--- | ---
Jun. 30, 2020
Stockholders' Equity Note [Abstract] |
Stockholders' Equity | Stockholders’ Equity Common stock The Company’s amended and restated certificate of incorporation authorizes the issuance of Class A common stock, Class B common stock, and Class C common stock. Holders of Class A common stock, Class B common stock, and Class C common stock are entitled to dividends on a pro rata basis, when, as, and if declared by the Company’s Board of Directors, subject to the rights of the holders of the Company’s preferred stock. Holders of Class A common stock are entitled to one vote per share, holders of Class B common stock are entitled to 10 votes per share, and holders of Class C common stock are entitled to zero votes per share. Holders of Class B common stock voluntarily converted 53.5 million and 63.4 million shares into an equivalent number of shares of Class A common stock during the three and six months ended June 30, 2020, respectively, and 25.9 million and 37.7 million during the three and six months ended June 30, 2019, respectively. As of June 30, 2020, the Company had authorized 2,400.0 million shares of Class A common stock, 475.0 million shares of Class B common stock, and 800.0 million shares of Class C common stock, each at par value of $0.00001. As of June 30, 2020, 316.1 million shares of Class A common stock, 97.9 million shares of Class B common stock, and no shares of Class C common stock were issued and outstanding. As of December 31, 2019, 255.8 million shares of Class A common stock, 161.2 million shares of Class B common stock, and no shares of Class C common stock were issued and outstanding. Class A shares issued and outstanding as of June 30, 2020 and December 31, 2019 exclude restricted stock awards granted to certain executives during the year. Class A shares issued and outstanding also excludes 10.3 million and 14.7 million unvested restricted stock awards granted to the Company's co-founders as of June 30, 2020 and December 31, 2019, respectively. See "Co-Founder Grants" section below for further details. Preferred stock The Company's Board of Directors will have the authority, without further action by the Company's stockholders, to issue up to 240.0 million shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by the Board of Directors. Stock repurchase program In February 2020, the Company's Board of Directors approved a stock repurchase program for the repurchase of up to $600 million of the Company’s outstanding shares of Class A common stock. Share repurchases will be subject to a review of the circumstances in place at that time and will be made from time to time in private transactions or open market purchases, as permitted by securities laws and other legal requirements. The program does not obligate the Company to repurchase any specific number of shares and may be discontinued at any time. During the three and six months ended June 30, 2020, the Company repurchased and subsequently retired 3.7 million and 7.4 million shares respectively of its Class A common stock for an aggregate amount of $75.8 million and $139.8 million, respectively. Equity incentive plans Under the 2018 Plan, the Company may grant stock-based awards to purchase or directly issue shares of common stock to employees, directors, and consultants. Options are granted at a price per share equal to the fair market value of the Company's common stock at the date of grant. Options granted are exercisable over a maximum term of 10 years from the date of grant and generally vest over a period of four years. RSUs and RSAs are also granted under the 2018 Plan. The 2018 Plan will terminate 10 years after the later of (i) its adoption or (ii) the most recent stockholder-approved increase in the number of shares reserved under the 2018 Plan, unless terminated earlier by the Company's Board of Directors. The 2018 Plan was adopted on March 22, 2018. In connection with the acquisition of HelloSign, the Company assumed unvested stock options that had been granted under HelloSign's 2011 Equity Incentive Plan. As of June 30, 2020, there were 41.1 million stock-based awards issued and outstanding and 75.2 million shares available for issuance under the Dropbox Equity Incentive Plans and HelloSign's 2011 Equity Incentive Plan (collectively, the "Plans"). Stock option and restricted stock activity for the Plans was as follows for the six months ended June 30, 2020:
|  |  | Options outstanding |  | Restricted stock outstanding
| Number of shares available for issuance under the Plans |  | Number of shares outstanding under the Plans |  | Weighted- average exercise price per share |  | Weighted- average remaining contractual term (In years) |  | Aggregate intrinsic value |  | Number of shares outstanding under the Plans |  | Weighted- average grant date fair value per share
Balance at December 31, 2019 | 66.2 |  |  | 2.0 |  |  | $ | 12.28 |  |  | 6.5 |  |  | $ | 16.40 |  |  | 30.7 |  |  | $ | 20.48 |
Additional shares authorized | 21.7 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Options exercised and RSUs released | — |  |  | (0.3 | ) |  | 4.77 |  |  | — |  |  | — |  |  | (6.1 | ) |  | 20.01 |
Options and RSUs canceled | 5.9 |  |  | (0.2 | ) |  | 17.40 |  |  | — |  |  | — |  |  | (5.8 | ) |  | 20.25 |
Shares repurchased for tax withholdings on release of restricted stock units and awards | 2.2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 20.00 |
Restricted stock and options granted | (20.8 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | 20.8 |  |  | 18.64 |
Balance at June 30, 2020 | 75.2 |  |  | 1.5 |  |  | $ | 13.37 |  |  | 6.2 |  |  | $ | 12.70 |  |  | 39.6 |  |  | $ | 19.62 |
Vested at June 30, 2020 |  |  | 1.0 |  |  | $ | 16.47 |  |  | 5.5 |  |  | $ | 6.30 |  |  | — |  |  | $ | — |
Unvested at June 30, 2020 |  |  | 0.5 |  |  | $ | 5.55 |  |  |  |  | $ | 6.40 |  |  | 39.6 |  |  | $ | 19.62 |
The following table summarizes information about the pre-tax intrinsic value of options exercised during the three and six months ended June 30, 2020 and 2019:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Intrinsic value of options exercised | $ | 3.0 |  |  | $ | 1.4 |  |  | $ | 4.8 |  |  | $ | 4.5 |
As of June 30, 2020, unamortized stock-based compensation related to unvested stock options, restricted stock awards (excluding the Co-Founder Grants), and RSUs was $741.1 million. The weighted-average period over which such compensation expense will be recognized if the requisite service is provided is approximately 3 years as of June 30, 2020. Assumed stock options In connection with the acquisition of HelloSign the Company assumed 0.9 million unvested stock options which were valued using the Black-Scholes option-pricing model. The fair value of stock options assumed were estimated using the following assumptions:
Expected volatility | 51.6 | %
Expected term (in years) | 3.4 - 7.0 |
Risk-free interest rate | 2.42% - 2.51% |
Dividend yield | — | %
Expected volatility. The expected volatility is based on the Company's historical volatility. Management believes this is the best estimate of the expected volatility over the expected life of its stock options. Expected term. The Company determines the expected term based on the average period the stock options are expected to remain outstanding, generally calculated as the midpoint of the stock options’ remaining vesting term and contractual expiration period, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury security in effect at the time the options were assumed for maturities corresponding with the expected term of the option. Expected dividend yield. The Company has not paid and does not expect to pay dividends. Consequently, the Company uses an expected dividend yield of zero. The estimated weighted-average grant date fair value for stock options assumed was $21.60 per share and total fair value of $19.4 million, of which, $18.6 million will be recognized as post-combination stock-based compensation expense. Co-Founder Grants In December 2017, the Board of Directors approved a grant to the Company’s co-founders of non-Plan RSAs with respect to 14.7 million shares of Class A Common Stock in the aggregate (collectively, the “Co-Founder Grants”), of which 10.3 million RSAs were granted to Mr. Houston, the Company’s co-founder and Chief Executive Officer, and 4.4 million RSAs were granted to Mr. Ferdowsi, the Company's co-founder and a former director. These Co-Founder Grants have service-based, market-based, and performance-based vesting conditions. The Co-Founder Grants are excluded from Class A common stock issued and outstanding until the satisfaction of these vesting conditions. The Co-Founder Grants also provide the holders with certain stockholder rights, such as the right to vote the shares with the other holders of Class A common stock and a right to cumulative declared dividends. However, the Co-Founder Grants are not considered a participating security for purposes of calculating net income (loss) per share attributable to common stockholders in Note 13, "Net Income (Loss) Per Share", as the right to the cumulative declared dividends is forfeitable if the service condition is not met. The Co-Founder Grants are eligible to vest over the ten-year period following the date the Company’s shares of Class A common stock commenced trading on the Nasdaq Global Select Market in connection with the Company’s IPO. The Co-Founder Grants comprise nine tranches that are eligible to vest based on the achievement of stock price goals, each of which are referred to as a Stock Price Target, measured over a consecutive thirty-day trading period during the Performance Period. The Performance Period began on January 1, 2019. During the first four years of the Performance Period, no more than 20% of the shares subject to each Co-Founder Grant would be eligible to vest in any calendar year. After the first four years, all shares are eligible to vest based on the achievement of the Stock Price Targets. The Company calculated the grant date fair value of the Co-Founder Grants based on multiple stock price paths developed through the use of a Monte Carlo simulation. A Monte Carlo simulation also calculates a derived service period for each of the nine vesting tranches, which is the measure of the expected time to achieve each Stock Price Target. A Monte Carlo simulation requires the use of various assumptions, including the underlying stock price, volatility, and the risk-free interest rate as of the valuation date, corresponding to the length of time remaining in the performance period, and expected dividend yield. The weighted-average grant date fair value of each Co-Founder Grant was estimated to be $10.60 per share. The weighted-average derived service period of each Co-Founder Grant was estimated to be 5.2 years, and ranged from 2.9 - 6.9 years. As of the valuation date, the Company expected to recognize an aggregate stock-based compensation expense of $156.2 million over the derived service period of each tranche using the accelerated attribution method as long as the co-founders satisfy their service-based vesting conditions. If the Stock Price Targets are met sooner than the derived service period, the Company will adjust its stock-based compensation to reflect the cumulative expense associated with the vested awards. The Company will recognize expense if the requisite service is provided, regardless of whether the market conditions are achieved. The Performance Vesting Condition for the Co-Founder Grants was satisfied on the date the Company’s shares of Class A common stock commenced trading on the Nasdaq Global Select Market in connection with the Company’s IPO, which was March 23, 2018. In March 2020, one of the Company's co-founders, Mr. Ferdowsi, resigned as a member of the Board of Directors and as an officer of the Company. As of the date of Mr. Ferdowsi’s resignation, none of the Stock Price Targets had been met, resulting in the forfeiture of his 4.4 million RSAs. As he did not provide the requisite service associated with the Co-Founder Grants, the Company reversed all stock-based compensation expense that had been recognized from the grant date through March 19, 2020, which totaled $23.8 million, of which $21.5 million related to expense recognized prior to December 31, 2019, and ceased recognizing further expense related to the award. The Company recognized stock-based compensation expense related to the Co-Founder Grant of $6.1 million and $12.2 million during the three and six months ended June 30, 2020, respectively, and $8.7 million and $17.3 million during the three and six months ended June 30, 2019, respectively. As of June 30, 2020, unamortized stock-based compensation expense related to the Co-Founder Grants was $46.8 million.

X
- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + 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 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
Name: | us-gaap_ShareholdersEquityAndShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_StockholdersEquityNoteAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration