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Stockholders' Equity | 12 Months Ended
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Dec. 31, 2024
Equity [Abstract] |
Stockholders' Equity | Stockholders’ Equity Capital Structure Common Stock The Company is authorized to issue 450,000,000 shares of common stock with a par value of $0.001 per share. As of December 31, 2024 and 2023, the Company had 75,807,505 and 73,316,968 shares of common stock issued and outstanding, respectively. During 2023, the Company issued 1,445 shares of common stock in connection with 2023 convertible senior note settlements. During 2023, the Company also received 370,877 shares from the partial unwind and settlement of capped calls resulting from the settlement of its 2023 convertible senior notes. The receipt of the 370,877 shares reduced the number of shares of common stock outstanding. Holders of the Company’s common stock are entitled to dividends, if and when declared by the board of directors. In the event of liquidation, dissolution or winding up, subject to the rights of the holders of any then outstanding shares of preferred stock, holders of common stock will be entitled to receive the assets and funds of the Company that are legally available for distribution. Preferred Stock The Company is authorized to designate and issue up to 5,000,000 shares of preferred stock with a par value of $0.001 per share in one or more series without stockholder approval and to fix the rights, preferences, privileges and restrictions thereof. As of December 31, 2024 and 2023, there were no shares of preferred stock issued and outstanding. Common Stock Reserved for Future Issuance Shares of common stock reserved for future issuance related to outstanding equity awards and employee equity incentive plans as of December 31, 2024, were as follows (in thousands):
|  | Common Stock Reserved
Stock options outstanding |  | 860 |
RSUs (including PRSUs) outstanding |  | 5,829 |
Shares available for future grant under 2014 Plan |  | 15,506 |
Shares available for future issuance under ESPP |  | 4,298 |
Total shares of common stock reserved |  | 26,493 |
Equity Incentive Plans Prior to the Company’s initial public offering (“IPO”) in April 2014, the Company granted stock options under its Amended and Restated 2004 Equity Incentive Plan, as amended (“2004 Plan”). Under the terms of the 2004 Plan, the Company had the ability to grant incentive and nonstatutory stock options. Incentive stock options could only be granted to Company employees. Nonstatutory stock options could be granted to Company employees, directors and consultants. Such options are exercisable at prices, as determined by the board of directors, generally equal to the fair value of the Company’s common stock at the date of grant. Options granted to employees generally vest over a four-year period, with an initial vesting period of 12 months for 25% of the shares, and the remaining 75% of the shares vesting monthly on a ratable basis over the remaining 36 months. Options generally expire 10 years after the grant date and are generally exercisable upon vesting. Vested options generally expire 90 days after termination of the optionee’s employment or relationship as a consultant or director, unless otherwise extended by the terms of the stock option agreement. In March 2014, the Company’s board of directors and stockholders approved the 2014 Equity Incentive Plan (“2014 Plan”) and 5,300,000 shares of common stock were authorized for issuance under the 2014 Plan. In addition, on the first day of each year beginning in 2015 and ending in 2024, the 2014 Plan provides for an annual automatic increase to the shares reserved for issuance in an amount equal to 5% of the total number of shares outstanding on December 31st of the preceding calendar year or a lesser number as determined by the Company’s board of directors. No further grants were made under the 2004 Plan once the 2014 Plan became effective on April 3, 2014. Upon the effectiveness of the 2014 Plan, all shares reserved for future issuance under the 2004 Plan became available for issuance under the 2014 Plan. Additionally, any forfeited or expired shares that would have otherwise returned to the 2004 Plan, instead return to the 2014 Plan. The 2014 Plan allows the Company to grant stock options, RSUs, restricted stock awards, performance stock awards, stock appreciation rights, performance cash awards, and other stock awards. To date, the Company has granted stock options and RSUs (including PRSUs) under the 2014 Plan. Stock options granted under the 2014 Plan are in general at a price equal to the fair market value of the common stock on the date of grant and vest over four years. The Company’s stock options expire 10 years from the date of grant. Each RSU granted under the 2014 Plan represents a right to receive one share of the Company’s common stock when the RSU vests. RSUs generally vest over one to four years. Vested options generally expire three months after termination of the optionee’s employment or relationship as a consultant or director, unless otherwise extended by the terms of the stock option agreement. In connection with the Company’s acquisition of Inference in 2020, the Company assumed unvested stock options that had been granted under the Inference Technologies Group Inc. 2018 Equity Incentive Plan. Each of the assumed stock options are subject to substantially the same terms and conditions as applied to the assumed stock options immediately prior to the acquisition date, except that the number of shares of the Company’s common stock subject to each assumed stock option and the exercise price has been adjusted in accordance with the terms of the acquisition agreement. If these assumed stock options are cancelled, forfeited or expire unexercised, the underlying shares do not become available for future grant. As of the acquisition date, the estimated fair value of the assumed unvested options was $7.6 million, of which $0.2 million was recognized as goodwill and the balance of $7.4 million is being recognized as stock-based compensation expense over the remaining service period of the assumed unvested stock options. Stock Options A summary of the Company’s stock option activity during the year ended December 31, 2024 is as follows (in thousands, except years and per share data):
|  | Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (Years) |  | Aggregate Intrinsic Value (1)
Outstanding as of December 31, 2023 |  | 918 |  |  | $ | 55.96 |  |  |  |  |
Options granted |  | 0 |  |  | 0.00 |  |  |  |  |
Options exercised |  | (26) |  |  | 18.93 |  |  |  |  |
Options forfeited or expired |  | (32) |  |  | 100.86 |  |  |  |  |
Outstanding as of December 31, 2024 |  | 860 |  |  | 55.34 |  |  | 3.7 |  | $ | 10,348 |
Vested and expected to vest as of December 31, 2024 |  | 860 |  |  | 55.34 |  |  | 3.7 |  | 10,348 |
Exercisable as of December 31, 2024 |  | 837 |  |  | 53.35 |  |  | 3.6 |  | 10,348 |
(1) The aggregate intrinsic value amounts are computed based on the difference between the exercise price of the stock options and the fair market value of the Company’s common stock of $40.64 per share as of December 31, 2024 for all in-the-money stock options outstanding. Following is additional information pertaining to the Company’s stock option activity (in thousands, except per share data):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Weighted average grant date fair value per share of options granted |  | $ | — |  |  | $ | — |  |  | $ | 50.44 |
Intrinsic value of options exercised (1) |  | 901 |  |  | 26,943 |  |  | 45,698 |
Total fair value of options vested during the period |  | 3,249 |  |  | 5,602 |  |  | 11,421 |
Cash received from options exercised |  | 481 |  |  | 9,127 |  |  | 8,522 |
(1) Intrinsic value of options exercised is the difference between the fair market value of the Company’s common stock at the time of exercise and the exercise price paid.
Restricted Stock Units (including PRSUs) A summary of RSU activity (including PRSUs) during the year ended December 31, 2024 is as follows (in thousands, except per share data):
|  | Number of Shares |  | Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2023 |  | 4,076 |  |  | $ | 83.25 |
RSUs granted(1) |  | 4,433 |  |  | 46.32 |
RSUs vested and released |  | (2,093) |  |  | 79.87 |
RSUs forfeited or cancelled |  | (587) |  |  | 71.10 |
Outstanding as of December 31, 2024 |  | 5,829 |  |  | 57.27 |
(1) Includes 159,016 PRSUs granted during 2024. PRSUs with Market and Service Conditions. In 2022, the Company granted 284,282 PRSUs subject to market and service conditions (“market-based PRSUs”) with a grant date fair value of $30.6 million as part of its annual grant of equity incentive awards to certain executives and in connection with the appointment of Michael Burkland as its new Chief Executive Officer. In 2023, the Company granted 35,921 market-based PRSUs with a grant date fair value of $3.1 million. In 2024, the Company granted an additional 159,016 market-based PRSUs with a grant date fair value of $9.6 million. The amount that may be earned pursuant to the market-based PRSUs ranges from 0% to 200% of the target number based on the Company’s relative total shareholder return (“RTSR”) performance as compared to the companies in the S&P Software and Services Select Index during three one-year performance periods. One-third of the total market-based PRSUs may be earned and settled in shares following the end of each -year performance period based on RTSR performance and subject to continued employment through the payment date. If the Company’s absolute total shareholder return for any performance period is negative, then no more than 100% of the target amount of market-based PRSUs for such period may be earned. If an executive's employment with the Company terminates before the end of the final one-year performance period due to death or disability, 100% (if due to death) or 50% (if due to disability) of the unvested market-based PRSUs may be earned subject to ultimate RTSR performance in each remaining performance period. Upon a qualifying termination of employment in connection with a change in control of the Company, the unvested market-based PRSUs will vest on a double-trigger basis (i) at the target level for the market-based PRSUs subject to the 2022-2024 performance period, (ii) for the market-based PRSUs subject to the 2023-2025 performance period, and (iii) for the market-based PRSUs subject to the 2024-2026 performance period, (a) at the target level for the uncompleted portions of the performance periods and (b) at the actual level of performance measured through the date of the change in control of the Company, based on the price per share paid in such change in control. The fair value of the market-based PRSUs is determined on their grant date using a Monte Carlo Simulation model based upon assumptions presented below. The Company recognizes the fair value of the market-based PRSUs ratably over their requisite service period. During the first quarter of 2023, the Company certified the performance results for the 2022 measurement period for the market-based PRSUs subject to the 2022-2024 performance period. Under the market-based PRSU agreements, the TSR payout percentage ranges from 0% to 200%, with a 50% payout at the 25th TSR percentile (threshold), 100% payout at the 55th TSR percentile (target), 200% payout at the 90th percentile or greater (maximum) and no payout below the threshold performance level. The Company determined that its actual total shareholder return was -52.64% for 2022, and that its relative total shareholder return ranking was in the 30.2 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 58.7% of target. During the first quarter of 2024, the Company certified the performance results for the 2023 measurement period for the market-based PRSUs subject to the 2022-2024 performance period. The Company determined that its actual total shareholder return was 19.95% for 2023, and that its relative total shareholder return ranking was in the 53.8 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 98.0% of target. During the first quarter of 2024, the Company also certified the performance results for the 2023 measurement period for the market-based PRSUs subject to the 2023-2025 performance period. The Company determined that its actual total shareholder return was 19.95% for 2023, and that its relative total shareholder return ranking was in the 50.5 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 92.5% of target. During the first quarter of 2025, the Company certified the performance results for the 2024 measurement period for the market-based PRSUs subject to the 2022-2024 performance period. The Company determined that its actual total shareholder return was (47.25)% for 2024, and that its relative total shareholder return ranking was in the 3.7 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.00% of target. During the first quarter of 2025, the Company certified the performance results for the 2024 measurement period for the market-based PRSUs subject to the 2023-2025 performance period. The Company determined that its actual total shareholder return was (47.25)% for 2024, and that its relative total shareholder return ranking was in the 2.9 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0% of target. During the first quarter of 2025, the Company also certified the performance results for the 2024 measurement period for the market-based PRSUs subject to the 2024-2026 performance period. The Company determined that its actual total shareholder return was (47.25)% for 2024, and that its relative total shareholder return ranking was in the 1.5 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0% of target. PRSUs with Revenue and Service Conditions. In 2022, the Company granted 66,167 PRSUs subject to revenue-based performance and service conditions (“revenue-based PRSUs”) with a grant date fair value of $6.6 million. The amount of revenue-based PRSUs that may be earned will be determined based on achievement of two quarterly revenue goals. One third of the revenue-based PRSUs may be earned based on achievement of the first revenue target and, if achieved, will vest in four quarterly installments, with the first installment occurring on the date such achievement is certified, subject to the executive's continuous service through the applicable vesting dates. Two thirds of the revenue-based PRSUs may be earned based on achievement of the second revenue target and, if achieved, will vest in eight quarterly installments, with the first installment occurring on the date such achievement is certified, subject to the executive's continuous service through the applicable vesting dates. The revenue-based PRSUs are otherwise on the Company's standard award terms for its market-based PRSUs. During 2023, the Company certified that the first revenue target was achieved, and thus recognized the related stock-based compensation expense for this first revenue target. However, the Company certified during the first quarter of 2024 that, as of December 31, 2023, the second revenue target was not achieved, and thus did not recognize the related stock-based compensation expense and cancelled the shares associated with this target. Following is additional information pertaining to the Company’s RSU activity (including PRSUs) (in thousands, except per share data):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Weighted average grant date fair value per share of RSUs granted |  | $ | 46.32 |  |  | $ | 69.84 |  |  | $ | 90.51 |
Total fair value of RSUs vested during the period |  | 167,115 |  |  | 184,443 |  |  | 125,798 |
Employee Stock Purchase Plan In March 2014, the Company’s board of directors and stockholders adopted the 2014 ESPP and the shares authorized for issuance thereunder. The 2014 ESPP became effective on April 3, 2014. The 2014 ESPP permits eligible employees to purchase shares of the Company’s common stock through payroll deductions with up to 15% of their pre-tax earnings subject to certain Internal Revenue Code limitations. The purchase price of the shares is 85% of the lower of the fair market value of the Company’s common stock on the first day of a six month offering period, except for the initial offering period, or the relevant purchase date. In addition, no participant may purchase more than 1,500 shares of common stock in each purchase period. The number of shares of common stock originally reserved for issuance under the 2014 ESPP was 880,000 shares, which increases automatically each year, beginning on January 1, 2015 and continuing through January 1, 2024, by the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year; (ii) 1,000,000 shares of common stock (subject to adjustment to reflect any split or combination of its common stock); or (iii) such lesser number as determined by its board of directors. During 2024 and 2023, 372,046 and 344,309 shares were purchased by employees under the 2014 ESPP at a weighted average price of $39.77 and $46.26 per share, respectively. Stock-Based Compensation Stock-based compensation expenses for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Cost of revenue |  | $ | 29,825 |  |  | $ | 38,259 |  |  | $ | 33,297 |
Research and development |  | 37,260 |  |  | 50,430 |  |  | 44,367 |
Sales and marketing |  | 51,214 |  |  | 66,229 |  |  | 59,300 |
General and administrative |  | 48,016 |  |  | 51,374 |  |  | 35,543 |
Total stock-based compensation |  | $ | 166,315 |  |  | $ | 206,292 |  |  | $ | 172,507 |
As of December 31, 2024, unrecognized stock-based compensation expense by award type and their expected weighted-average recognition periods are summarized in the following table (in thousands, except years).
|  | Stock Option |  | RSU (excluding PRSUs) |  | PRSU |  | ESPP
Unrecognized stock-based compensation expense |  | $ | 1,246 |  |  | $ | 294,832 |  |  | $ | 10,376 |  |  | $ | 2,714 |
Weighted-average amortization period |  | 0.9 years |  | 2.8 years |  | 1.4 years |  | 0.4 years
The Company recognizes stock-based compensation expense that is calculated based upon awards that have vested, reduced for actual forfeitures. All stock-based compensation for equity awards granted to employees and non-employee directors is measured based on the grant date fair value of the award. The Company values RSUs, including PRSUs subject to performance conditions, at the closing market price of its common stock on the date of grant. The Company estimates the fair value of each stock option and purchase right under the 2014 ESPP granted to employees on the date of grant using the Black-Scholes option-pricing model using the assumptions disclosed in the table below. The Company estimates the fair value of PRSUs subject to market conditions using a Monte Carlo Simulation model using the assumptions disclosed in the table below. Expected volatility is based upon the weighting of the Company’s historical volatility. The expected term of options granted is estimated using the simplified method by taking the average of the vesting term and the contractual term of the option. The expected volatility assumption for purchase rights under the 2014 ESPP is based on the historical volatility of the Company’s common stock. The risk-free rate for the expected term of the awards is based on U.S. Treasury zero-coupon issues at the time of grant. The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock. Accordingly, the expected dividend yield is zero. The weighted average assumptions used to value stock options granted during the periods presented were as follows:
Stock Options |  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Expected term (years) |  | — |  | — |  | 6.0
Volatility |  | — |  | — |  | 46%
Risk-free interest rate |  | — |  | — |  | 1.8%
Dividend yield |  | — |  | — |  | —
The weighted average assumptions used to value PRSUs with market conditions granted during the periods presented were as follows:
PRSUs (Market Conditions) |  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Expected term (years) |  | 2.9 |  | 2.8 |  | 3.0
Volatility |  | 49.4% |  | 51.1% |  | 53.0%
Risk-free interest rate |  | 4.5% |  | 4.5% |  | 3.5%
Dividend yield |  | — |  | — |  | —
The weighted average assumptions used to value purchase rights under the 2014 ESPP granted during the periods presented were as follows:
ESPP |  | Granted In
|  | November 2024 |  | May 2024 |  | November 2023 |  | May 2023 |  | November 2022 |  | May 2022
Expected term (years) |  | 0.5 |  | 0.5 |  | 0.5 |  | 0.5 |  | 0.5 |  | 0.5
Volatility |  | 63% |  | 41% |  | 48% |  | 75% |  | 59% |  | 46%
Risk-free interest rate |  | 4.3% |  | 5.1% |  | 4.8% |  | 4.6% |  | 2.1% |  | 0.2%
Dividend yield |  | — |  | — |  | — |  | — |  | — |  | —

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- 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 -Topic 505 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/505/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/718/tableOfContent + Details
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