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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation Plans and Awards The Company’s eligible employees participate in various stock-based compensation plans, which are provided by the Company directly. In August 2021, the board of directors approved the 2021 Incentive Award Plan (the “2021 Plan”), which became effective on September 28, 2021, and the Company no longer grants equity awards under any prior equity plan. Upon the 2021 Plan becoming effective, there were 11,076,515 shares of Class A common stock authorized under the 2021 Plan, and the remaining shares available for issuance under the 2010 Equity Incentive Plan, 2011 Stock Plan, 2012 Milestone Stock Plan, and 2019 Founder Stock Plan (collectively, the “Prior Plans”) were also made available for issuance under the 2021 Plan. The shares authorized under the 2021 Plan will increase annually, beginning on January 1, 2022 and continuing through 2031, by the lesser of (i) 5% of the outstanding common stock (on an as converted basis) as of the last day of the immediately preceding fiscal year, or (ii) a smaller amount as agreed by the board of directors. Awards granted under the 2021 Plan generally vest over four years. In addition, the shares authorized under the 2021 Plan will increase, among other things, to the extent that an award (including an award under the Prior Plans) terminates, expires, or lapses for any reason or an award is settled in cash without the delivery of shares. In January 2022 and 2023, the board of directors approved an annual increase of 5,735,463 and 5,766,938 shares, respectively, to the shares authorized for issuance under the 2021 Plan, and 20,705,913 shares remained available for future issuance pursuant to new awards as of September 30, 2023. Employee Stock Purchase Plan In August 2021, the board of directors adopted and the stockholders of the Company approved the 2021 Employee Stock Purchase Plan (the “ESPP” and, collectively with the Prior Plans and the 2021 Plan, the “Plans”). The ESPP initially reserved and authorized the issuance of up to 2,215,303 shares of Class A common stock, and such reserve will be increased annually on the first day of each fiscal year beginning in 2022 and ending in 2031, by an amount equal to the lesser of (i) 1% of the shares of the Company’s common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by the board of directors; provided, however, no more than 16,614,772 shares of common stock may be issued under the ESPP. In January 2022 and 2023, the board of directors approved an annual increase of 1,147,092 and 1,153,387 shares, respectively, to the ESPP, and 4,210,184 shares remained available for future issuance pursuant to ESPP purchases as of September 30, 2023. The fair value for ESPP purchase rights granted under the Plans are estimated at the date of grant using the Black-Scholes option-pricing model. ESPP purchase rights for 475,916 shares and 528,238 shares were granted during both the nine months ended September 30, 2023 and 2022, respectively. No ESPP purchase rights were granted during the three months ended September 30, 2023 and 2022. The following range of assumptions was used for ESPP purchase rights granted:
|  |  | Nine Months Ended September 30,
|  |  |  |  | 2023 |  | 2022
ESPP purchase rights |  |  |  |  |  |  |
Risk-free interest rates |  |  |  |  | 4.0% - 5.2% |  | 1.5% - 2.6%
Expected dividend yield |  |  |  |  | — |  | —
Expected term |  |  |  |  | 0.5 - 2.0 years |  | 0.5 - 2.0 years
Volatility |  |  |  |  | 60 | % |  | 53 | %
Offering periods begin on May 15 and November 15 of each year and consist of four six-month purchase periods. Eligible employees may contribute up to 20% of their base wages and the purchase price of shares of Class A common stock under an offering will be 85% of the lesser of the fair market value of Class A common stock on (i) the first day of the offering period, and (ii) the applicable purchase date. If such fair market value decreases from the first day of the offering period to the applicable purchase date, the offering period will terminate after the purchase of shares and all participants will be automatically enrolled in the next offering period (a “rollover event”). The following table presents other relevant ESPP information:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Shares purchased under the ESPP | — |  |  | — |  |  | 116,936 |  |  | 118,329 |
Stock-based compensation expense related to ESPP | $ | 608 |  |  | $ | 638 |  |  | $ | 2,020 |  |  | $ | 2,095 |
Employee contributions | $ | 459 |  |  | $ | 539 |  |  | $ | 1,455 |  |  | $ | 2,126 |
As of September 30, 2023, total unrecognized compensation costs associated with the ESPP was $1.9 million and is expected to be amortized over a weighted average period of 0.7 years. Stock-based Compensation Expense Stock-based compensation expense consisted of the following:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Cost of goods sold | $ | 269 |  |  | $ | 236 |  |  | $ | 753 |  |  | $ | 693 |
Selling, general, and administrative expenses | 16,022 |  |  | 24,065 |  |  | 53,330 |  |  | 77,516 |
Total stock-based compensation expense | $ | 16,291 |  |  | $ | 24,301 |  |  | $ | 54,083 |  |  | $ | 78,209 |
Stock-based compensation expense for the three and nine months ended September 30, 2023 includes $10.4 million and $35.4 million related to the 2021 Founders Grant, as described below, respectively, and $4.4 million and $14.2 million in connection with RSUs, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2022 includes $18.7 million and $58.1 million related to the 2021 Founders Grant, respectively, and $3.8 million and $14.6 million in connection with RSUs, respectively. Stock Options The fair value for stock options granted under the Plans are estimated at the date of grant using the Black-Scholes option-pricing model. No stock options were granted in 2023 or 2022. A summary of stock option activity for the nine months ended September 30, 2023 is as follows:
| Number of Stock Options |  | Weighted Average Exercise Price |  | Weighted average contractual term (years) |  | Aggregate intrinsic value
Balance at December 31, 2022 | 2,965,144 |  |  | $ | 7.23 |  |  | 4.5 |  | $ | 21,243 |
Granted | — |  |  | — |  |  |  |  |
Exercised | (727,932) |  |  | 6.47 |  |  |  |  | 4,852 |
Forfeited | — |  |  | — |  |  |  |  |
Balance at September 30, 2023 | 2,237,212 |  |  | $ | 7.48 |  |  | 4.3 |  | $ | 14,980 |
Exercisable as of September 30, 2023 | 2,237,212 |  |  | $ | 7.48 |  |  | 4.3 |  | $ | 14,980 |
Vested as of September 30, 2023 | 1,911,222 |  |  | 5.70 |  |  | 3.8 |  |
Unvested as of September 30, 2023 | 325,990 |  |  | $ | 17.95 |  |  | 7.5 |  |
The total value of unrecognized stock compensation expense related to unvested options granted under the Plans was $3.1 million as of September 30, 2023, and is expected to be recognized over 0.6 years. Restricted Stock Units and Performance Stock Units A summary of RSU activity for the nine months ended September 30, 2023 is as follows:
| Number of Restricted Stock Units |  | Weighted Average Grant Date Fair Value
Unvested as of December 31, 2022 | 3,314,420 |  |  | $ | 29.06 |
Granted | 1,677,009 |  | 13.27 |
Forfeited | (292,959) |  | 23.27 |
Released | (839,551) |  | 20.82 |
Vested and not yet released | (371,198) |  | 29.48 |
Unvested as of September 30, 2023 | 3,487,721 |  |  | $ | 23.89 |
The total value of unrecognized stock compensation expense related to outstanding RSUs and PSUs granted under the Plans was $48.0 million and $22.3 million as of September 30, 2023, respectively, which is expected to be recognized over a weighted-average period of 1.2 years and 0.6 years, respectively. No PSUs were granted, forfeited, released or vested during the nine months ended September 30, 2023. In June 2021, the Company granted 4,397,688 PSUs and 1,884,724 RSUs to the co-CEOs, in the aggregate, under the 2019 Founder Stock Plan (the “Founders Grant”). The PSUs vest upon two performance conditions, (i) a qualified public offering, which was satisfied upon the Company’s direct listing on September 20, 2021 (the “Direct Listing”), and (ii) the price of the Company’s Class A common stock reaching stock price hurdles over a period of ten years, as defined by the terms of the award. The PSUs are subject to the co-CEOs’ continued employment with the Company through the applicable vesting date. If the PSUs vest, the Company will deliver one share of Class B common stock on the settlement date. Unvested PSUs expire in ten years from the date of grant. The terms of the PSUs granted are described further below. The PSUs are divided into eight substantially equal tranches, each one vesting on the date the 90-day trailing volume-weighted average trading price of the Company’s Class A common stock exceeds the stock price hurdle, as set forth in the table below, provided that no PSUs may vest prior to the six month anniversary of the Direct Listing.
Tranche |  | Number of PSUs |  | Stock Price Hurdle
1 |  | 549,712 |  |  | $ | 47.75 |
2 |  | 549,710 |  |  | $ | 55.71 |
3 |  | 549,712 |  |  | $ | 63.67 |
4 |  | 549,710 |  |  | $ | 71.63 |
5 |  | 549,712 |  |  | $ | 79.59 |
6 |  | 549,710 |  |  | $ | 87.55 |
7 |  | 549,712 |  |  | $ | 95.50 |
8 |  | 549,710 |  |  | $ | 103.46 |
The Company used a Monte Carlo simulation to calculate the grant-date fair value of the PSUs of $128.8 million. Since the PSUs contain a performance and market condition, the stock-based compensation expense will be recognized when it becomes probable that the performance condition will be met using the accelerated attribution method. Stock-based compensation will be recognized over the period of time the market condition for each tranche is expected to be met (i.e., the derived service period). The performance condition was satisfied at September 29, 2021 by the Direct Listing, and the Company began recording expense at that time. The Founders Grant RSUs will vest in equal monthly installments over a period of five years, subject to the co-CEOs’ continued employment with the Company through the applicable vesting date and conditioned upon the completion of a qualified public offering. The grant-date fair value of the RSUs is $66.9 million. Since the RSUs contain a performance condition, stock-based compensation expense is recognized using the accelerated attribution method when it becomes probable that the performance condition will be met. The performance condition was satisfied on September 29, 2021 by the Direct Listing, and the Company began recording expense at that time. Shares underlying vested PSUs and RSUs will be issued to the CEOs on a specified quarterly date following the second anniversary of the vesting date, except for an amount necessary to cover any taxes due in connection with the vesting, which will be withheld or sold to cover, or issued to offset, such taxes. Any RSUs or PSUs subject to the award that have not vested by the tenth anniversary of the grant date will be forfeited. RSUs granted prior to the Company’s Direct Listing vest upon the satisfaction of both a service and a performance condition. Prior to its Direct Listing, the Company had concluded that it was not probable that the performance condition would be satisfied as the closing of a qualified public offering or change in control is not deemed probable until consummated. Upon its Direct Listing on September 29, 2021, the Company recorded stock-based compensation expense for the service condition satisfied through such date and began recording stock-based compensation expense using the accelerated attribution method as the service conditions are met. RSUs issued after its Direct Listing only contain a service condition and are recognized on a straight line basis over the vesting period.

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