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Stockholders' Equity and Equity Incentive Plans
 3 Months Ended
Mar. 31, 2023
Equity [Abstract]  
Stockholders' Equity (Deficit) and Equity Incentive Plans
(6)
Stockholders’ Equity and Equity Incentive Plans

Preferred stock

In connection with the direct listing of the Company's Class A common stock on the Nasdaq Capital Market (the “Direct Listing”), on September 21, 2021, an amended and restated certificate of incorporation of the Company was filed with the Secretary of State of the State of Delaware, which authorized the issuance of 20 million shares of undesignated preferred stock with a par value of $0.00001 per share and rights and preferences, including voting rights, designated from time to time by the Company's board of directors.

Common Stock

The Company has two classes of common stock: Class A common stock and Class B common stock. The Company's amended and restated certificate of incorporation authorizes the issuance of 600 million shares of Class A common stock and 600 million shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to five votes. Class A and Class B common stock each have a par value of $0.00001 per share, and are referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends whenever funds are legally available and if declared by the Company's board of directors.

Shares of Class B common stock may be converted to Class A common stock at any time at the option of the stockholder. Shares of Class B common stock will also automatically convert into one share of Class A common stock upon any transfer, except for certain permitted transfers described in the Company's amended and restated certificate of incorporation. In addition, each share of Class B common stock held by the Company's three cofounders (or any of such founder’s affiliates) will convert automatically into one share of Class A common stock on the earlier of: (i) the death or incapacity of such founder or (ii) the date that is six months following the date on which such founder is no longer an employee or director of the Company (unless such founder has rejoined the Company during such six-month period). Each outstanding share of the Company's Class B common stock will also convert automatically into one share of Class A common stock on the date that is six months following the date on which no founder is an employee or director of the Company (unless a founder has rejoined the Company during such six-month period). In addition, any transfer by a founder (or such founder’s affiliates) to one or more of the other founders (or such founders’ affiliates) will not result in the automatic conversion of such shares of Class B common stock to Class A common stock. Once converted into Class A common stock, the Class B common stock may not be reissued.

The Company has reserved shares of its common stock as follows:

 

 

 

As of
March 31,
2023

 

 

As of
December 31,
2022

 

 

 

 

 

 

 

 

2014 Stock Option and Grant Plan and 2021 Incentive Award Plan:

 

 

 

 

 

 

Equity plan stock options outstanding

 

 

16,169,545

 

 

 

16,767,752

 

RSUs outstanding

 

 

10,635,635

 

 

 

9,914,125

 

Shares available for future issuance

 

 

20,977,550

 

 

 

16,774,634

 

2021 Employee Stock Purchase Plan:

 

 

 

 

 

 

Shares available for future issuance

 

 

4,553,786

 

 

 

3,411,791

 

Total reserved shares

 

 

52,336,516

 

 

 

46,868,302

 

 

Equity Incentive Plans

2014 Stock Option and Grant Plan

In December 2014, the Company adopted its 2014 Stock Option and Grant Plan (as amended, the “2014 Plan”), pursuant to which shares of the Company’s common stock were reserved for the issuance of stock options (incentive and non-statutory), restricted stock units (“RSUs”), and restricted stock to employees, directors, and consultants under terms and provisions established by the Company's board of directors and approved by the Company’s stockholders. The 2014 Plan was terminated in September 2021 in connection with the Direct Listing but continues to govern the terms of outstanding awards that were granted prior to the termination of the 2014 Plan. No further equity awards will be granted under the 2014 Plan. With the establishment of the 2021 Incentive Award Plan (the “2021 Plan”) as further discussed below, upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class A common stock underlying outstanding stock-based awards granted under the 2014 Plan, an equal number of shares of Class A common stock will become available for grant under the 2021 Plan.

2021 Incentive Award Plan

In August 2021, the Company's board of directors adopted, and its stockholders approved, the 2021 Plan, which became effective in connection with the Direct Listing. The 2021 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, performance bonus awards, performance stock units, dividend equivalent awards and other forms of equity compensation (collectively, “equity awards”). As of March 31, 2023, a total of 20,977,550 shares of the Company's Class A common stock have been reserved for issuance under the 2021 Plan in addition to (i) any shares available for issuance under the 2014 Plan as of the effective date of the 2021 Plan, (ii) the number of shares represented by awards outstanding under the Company's 2014 Plan (“Prior Plan Awards”) that become available upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class A common stock underlying outstanding stock awards granted under the 2014 Plan, and (iii) an annual increase on the first day of each fiscal year beginning in 2022 and ending in 2031, equal to the lesser of (A) 5% 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 (B) such smaller number of shares of stock as determined by the Company's board of directors; provided, however, that no more than 88,000,000 shares of stock may be issued upon the exercise of incentive stock options.

Stock Option Awards

Stock options granted under the 2014 Plan and the 2021 Plan (collectively, the “combined stock plans”) generally vest based on continued service over four years. Options issued outside of the combined stock plans were immaterial and therefore not discussed further below.

Option activity under the Company's combined stock plans for the three months ended March 31, 2023 is set forth below:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

average

 

 

Aggregate

 

 

 

Outstanding

 

 

average

 

 

remaining

 

 

intrinsic

 

 

 

stock

 

 

exercise

 

 

contractual

 

 

value

 

 

 

options

 

 

price

 

 

life (years)

 

 

(in thousands)

 

Balances as of December 31, 2022

 

 

16,767,752

 

 

$

4.19

 

 

 

7.19

 

 

$

132,298

 

Granted

 

 

241,819

 

 

 

12.37

 

 

 

 

 

 

 

Exercised

 

 

(554,344

)

 

 

3.04

 

 

 

 

 

 

 

Cancelled/forfeited

 

 

(285,682

)

 

 

5.20

 

 

 

 

 

 

 

Balances as of March 31, 2023(1)

 

 

16,169,545

 

 

$

4.34

 

 

 

6.99

 

 

$

130,973

 

Exercisable as of March 31, 2023(2)

 

 

12,764,513

 

 

$

3.39

 

 

 

6.68

 

 

$

115,519

 

 

(1)
As no forfeitures are estimated due to the Company's adoption of ASU No. 2016-09, all options are vested or expected to vest. As of March 31, 2023, no options were outstanding that were subject to a future performance condition
(2)
Exercisable shares include vested options as well as unvested shares that can be early exercised

During December 2020, the Company granted 1,756,545 stock options to two executives which contain both a service condition and a performance condition (collectively, the “Performance Options”). Based on the terms of the Performance Options, the vesting commencement date is defined as the date on which a registration statement on Form S-1 filed with the SEC becomes effective (a “QPO Event”). In conjunction with the Direct Listing, a QPO Event occurred and therefore the options began to vest 1/24th each month subsequent to September 21, 2021. During the three months ended March 31, 2023 and 2022, the Company recognized $0.2 million and $0.5 million, respectively, in stock-based compensation expense related to these Performance Options using the

accelerated attribution method. The unrecognized stock-based compensation expense for the Performance Options was $0.1 million and $0.3 million as of March 31, 2023 and December 31, 2022, respectively.

The aggregate intrinsic values of options are calculated as the difference between the exercise price of the options and the market price for shares of the Company’s common stock as of each period-end. The total intrinsic value of options exercised for the three months ended March 31, 2023 and 2022 was $5.2 million and $25.6 million, respectively.

Stock options granted during the three months ended March 31, 2023 had a weighted average grant date fair value of $6.84 per share. No stock options were granted in three months ended March 31, 2022. With the exception of the Performance Options detailed above, the fair value is being expensed over the vesting period of the options on a straight-line basis as the services are being provided. No tax benefits were realized from options during the periods.

As of March 31, 2023, total unrecognized stock-based compensation expense related to options outstanding under the combined stock plans was $19.3 million. This unrecognized expense as of March 31, 2023 is expected to be recognized over the weighted average remaining vesting period of 2.38 years. As of March 31, 2023, the Company had 354,500 shares of non-employee stock options outstanding under the combined stock plans.

The fair value of each option granted to employees under the 2021 Plan is estimated on the grant date using the Black-Scholes pricing model.

Restricted Stock Units

RSUs granted under the 2021 Plan generally vest based on continued service. RSUs granted pursuant to the 2014 Plan vest according to a service condition as well as a performance condition, through a liquidity event, including (i) a change in control of the Company or (ii) the initial public offering of the Company’s equity securities, following which the securities shall be publicly traded, which includes a direct listing. As a result of the Direct Listing, the performance condition for all RSUs granted pursuant to the 2014 Plan has been met. During the three months ended March 31, 2023 and 2022, the Company recorded $16.6 million and $6.1 million in stock-based compensation expense related to RSUs, respectively.

As of March 31, 2023, total unrecognized stock-based compensation expense related to RSUs was $170.6 million. This unrecognized expense as of March 31, 2023 is expected to be recognized over the weighted average remaining vesting period of 2.60 years. As of March 31, 2023, the Company had 192,019 shares of non-employee RSUs outstanding under the combined stock plans.

RSU activity during the three months ended March 31, 2023 was as follows:

 

 

 

Restricted stock
units

 

 

Weighted-average
grant date fair
value per share

 

Balance as of December 31, 2022

 

 

9,914,125

 

 

$

19.14

 

Granted

 

 

1,983,923

 

 

 

13.49

 

Vested

 

 

(875,055

)

 

 

20.28

 

Cancelled/forfeited

 

 

(387,358

)

 

 

20.35

 

Balance as of March 31, 2023

 

 

10,635,635

 

 

$

17.94

 

 

2021 Employee Stock Purchase Plan

In August 2021, the Company’s board of directors adopted, and its stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective in connection with the Direct Listing. The ESPP authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees. As of March 31, 2023, a total of 4,553,786 shares of the Company’s Class A common stock have been reserved for future issuance under the ESPP, in addition to any annual automatic evergreen increases in the number of shares of Class A common stock reserved for future issuance under the ESPP. The ESPP offers employees the option to purchase shares through a series of consecutive 12-month offering periods on each May 15th and November 15th (with two six-month purchase periods during each offering period). The price at which Class A common stock is purchased under the ESPP is equal to the lower of (i) 85% of the closing trading price per share of the Company's Class A common stock on the first trading date of an offering period in which a participant is enrolled or (ii) 85% of the closing trading price per share

on the purchase date, which will occur on the last trading day of each purchase period, or such other price designated by the administrator.

The initial offering period under the ESPP was longer than 12 months, commencing on September 28, 2021 and ending on November 14, 2022. The first purchase period commenced on September 28, 2021 and ended on May 14, 2022. The ESPP offers a rollover feature pursuant to which, if the fair market value of a share of Class A common stock on the first purchase date is lower than the fair market value on the first trading day of the offering period, the respective offering period will terminate and each participant will be automatically enrolled in the offering period that commences immediately following the purchase date. In accordance with the rollover feature, immediately following the conclusion of the first and second purchase periods on May 14, 2022 and November 14, 2022, respectively, the corresponding offering period was terminated and participants were automatically enrolled in a new 12-month offering period commencing on May 15, 2022 and November 15, 2022 and ending on May 14, 2023 and November 14, 2023, respectively. The impact of the rollover feature did not result in material incremental compensation cost for the three months ended March 31, 2023.

As of March 31, 2023, 0.4 million shares have been purchased under the ESPP. During the three months ended March 31, 2023 and 2022, the Company recognized $0.6 million and $1.4 million of stock-based compensation expense related to the ESPP, respectively. As of March 31, 2023, total unrecognized compensation cost related to the ESPP was $1.2 million, which will be amortized over a weighted average period of 0.62 years.

Stock-based compensation expense, net of actual forfeitures is reflected in the condensed consolidated statement of operations and comprehensive loss (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

1,792

 

 

$

922

 

 

Research and development

 

 

8,579

 

 

 

4,284

 

 

Sales and marketing

 

 

6,368

 

 

 

3,240

 

 

General and administrative

 

 

3,218

 

 

 

5,057

 

 

Total stock-based compensation expense

 

$

19,957

 

 

$

13,503