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Stockholders' Equity | 9 Months Ended
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Sep. 30, 2022
Stockholders' Equity Note [Abstract] |
Stockholders' Equity | Stockholders' Equity Equity Incentive Plans The Company maintains four equity incentive plans: the 2019 Equity Incentive Plan (the "2019 Plan"), 2011 Equity Incentive Plan ("2011 Plan"), Employee Stock Purchase Plan ("ESPP") and the Signal Sciences Corp. 2014 Stock Option and Grant Plan, as amended (the “Signal Plan”). The 2019 Plan became effective in May 2019 and replaced the 2011 Plan. The Company's 2019 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock units ("RSUs"), restricted stock awards, performance-based stock awards ("PSUs"), and other forms of equity compensation, which are collectively referred to as stock awards to its employees, directors, and consultants. As of September 30, 2022 and December 31, 2021, there were 9.8 million and 15.9 million Class A common stock available for issuance under the 2019 Plan, respectively. As of September 30, 2022 and December 31, 2021, 122.8 million and 118.8 million shares of Class A common stock were issued and outstanding, respectively. Stock Options Options granted under the 2011 Plan and 2019 Plan are exercisable for Class A common stock and generally expire within 10 years from the date of grant and generally vest over four years, at the rate of 25% on the first anniversary of the date of grant and ratably on a monthly basis over the remaining 36-month period thereafter based on continued service. Due to the Conversion on July 12, 2021, options granted under the 2011 Plan are now exercisable for Class A common stock. Forfeitures are recognized as they occur. The following table summarizes stock option activity during the nine months ended September 30, 2022:
|  | Shares |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term |  | Aggregate Intrinsic Value
|  | (in thousands) |  |  |  | (in years) |  | (in thousands)
Outstanding at December 31, 2021 |  | 4,369 |  |  | 5.07 |  | 5.10 |  | $ | 132,721 |
Granted |  | — |  |  | — |  |  |  |  |
Exercised |  | (1,712) |  |  | 3.11 |  |  |  |
Cancelled/forfeited |  | (143) |  |  | 12.14 |  |  |  |
Outstanding at September 30, 2022 |  | 2,514 |  |  | 6.01 |  | 5.10 |  | $ | 9,912 |
Vested and exercisable at September 30, 2022 |  | 2,328 |  |  | 5.58 |  | 5.00 |  | $ | 9,805 |
During the three months ended September 30, 2022 and 2021, the Company recorded stock-based compensation expense from stock options of approximately $1.9 million and $5.3 million, respectively. During the nine months ended September 30, 2022 and 2021, the Company recorded stock-based compensation expense from stock options of approximately $5.1 million and $13.4 million, respectively. During the three and nine months ended September 30, 2022, we modified the terms of options awarded to certain employees upon their change in employment status. As a result, we recorded incremental stock-based compensation expense in relation to these modifications of $0.7 million and $0.8 million, respectively, during the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2021, we modified the terms of options awarded to certain employees upon their change in employment status. As a result, we recorded stock-based compensation expense of $2.4 million and $3.7 million during three and nine months ended September 30, 2021, respectively, in relation to such modifications. Included in the expense for the three and nine months ended September 30, 2021 are incremental fair value adjustments of $2.1 million and $3.3 million, respectively. Restricted Stock Units ("RSUs") The Company began granting RSUs under the 2019 Plan during the fiscal year ended December 31, 2019. The fair value of RSUs is based on the grant date fair value and is expensed on a straight-line basis over the applicable vesting period. RSUs granted to new hires typically vest over four years, at the rate of 25% on the first anniversary of the vest date and ratably on a quarterly basis over the remaining 36-month period thereafter. RSUs granted to existing employees typically vest in equal quarterly installments over a four-year service period. All vesting is contingent on continued service. Forfeitures are recognized as they occur. The following table summarizes RSU activity during the nine months ended September 30, 2022:
|  | Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Unvested RSUs as of December 31, 2021 |  | 5,285 |  |  | $ | 42.80 |
Granted |  | 11,088 |  |  | 15.00 |
Vested |  | (1,918) |  |  | 35.41 |
Cancelled/forfeited |  | (1,474) |  |  | 32.54 |
Unvested RSUs as of September 30, 2022 |  | 12,981 |  |  | $ | 21.32 |
During the three months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense related to RSUs of $27.8 million and $23.0 million, respectively. During the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense related to RSUs of $72.9 million and $52.0 million, respectively. During the three and nine months ended September 30, 2022, we modified the terms of RSUs awarded to certain employees upon their change in employment status. As a result, we recorded incremental stock-based compensation expense in relation to the modification of $1.9 million in both the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2021, we modified the terms of RSUs awarded to an employee upon his changes in employment status. As a result, we recorded incremental stock-based compensation expense in relation to the modification of $3.9 million in both the three and nine months ended September 30, 2021. Stock Subject to Revest ("Revest Shares") In conjunction with a prior acquisition in fiscal 2020, a restriction was placed on 896,499 shares belonging to the three co-founders which are subject to revesting on a quarterly basis over a 2 year period. The following table summarizes the activity related to the revest shares during the nine months ended September 30, 2022:
|  | Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Unvested revest shares as of December 31, 2021 |  | 336 |  |  | $ | 97.84 |
Granted |  | — |  |  | — |
Modification of shares subject to revest |  | (224) |  |  | 97.84
Vested |  | (112) |  |  | 97.84
Cancelled/forfeited |  | — |  |  | — |
Unvested revest shares as of September 30, 2022 |  | — |  |  | $ | — |
For the three months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense related to revest shares of $7.3 million and $11.0 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense related to revest shares of $27.6 million and $32.9 million, respectively. On January 24, 2022, the Company entered into an agreement with certain holders of restricted stock, who had sold their awards in advance of its vesting conditions, in order to return the proceeds associated with the remaining 224,124 unvested shares as of December 31, 2021. These stockholders are eligible to continue vesting under the original agreements as long as they have continued service as either an employee or consultant. On January 31, 2022, the Company received $10.7 million from these stockholders related to the settlement of the matter, which the Company classified as unrestricted cash on its condensed consolidated balance sheets. This amount will similarly be returned to the holders in accordance with the vesting under the original agreements. Correspondingly, the Company reclassified the award from equity to liability as the award will now be settled for the fixed monetary amount received, rather than a release of the restrictions on shares. In February 2022, one of the stockholders had a change in employment status and the Company accelerated the remaining stock-based compensation associated with his awards on his last day of service as an employee as his services under the modified arrangement were not substantive. For the three months ended September 30, 2022, the Company did not recognize any stock-based compensation expense associated with the modification of these awards. For the nine months ended September 30, 2022, the Company recognized stock-based compensation expense of $5.6 million associated with the modification of these awards. Performance-Based Restricted Stock Units ("PSUs") Performance stock awards In February 2021, pursuant to the Company’s 2019 Equity Incentive Plan, the Company granted shares of PSUs to certain employees of the Company, which are to vest based on the level of achievement of certain Company and individual targets related to the Company's operating plan for the fiscal year 2021 ("2021 Operating Plan"). In addition, the awards are subject to each recipient’s continuous service through each applicable vest dates. In February, 2022, the Company concluded that the minimum target performance to be eligible for vesting under the 2021 Operating Plan was not attained, and as such, none of the 2021 PSUs were eligible to vest and the awards were cancelled. In February 2022, pursuant to the Company's 2019 Equity Incentive Plan, the Company granted certain employees shares of PSUs, which are to vest based on the level of achievement of certain Company-wide targets related to the Company's operating plan for the fiscal year 2022. In addition, the awards are subject to each recipient’s continuous service through each applicable vest dates. The Company has accounted for these awards as equity-based awards and will recognize stock-based compensation expense over the employees' requisite service period based on the expected attainment of the Company-wide targets as of the end of each reporting period. For the three and nine months ended September 30, 2022, the Company recognized $0.1 million and $1.1 million of stock-based compensation expense associated with these awards, respectively. For the three and nine months ended September 30, 2021, the Company recognized $(0.5) million and $3.8 million of stock-based compensation expense (benefit), respectively. During the three and nine months ended September 30, 2022, we modified the terms of PSUs awarded to an employee upon their change in employment status. As a result, we recorded incremental stock-based compensation expense in relation to the modification of $0.4 million in both the three and nine months ended September 30, 2022. 2022 Bonus Program On February 11, 2022, the Compensation Committee approved a company-wide bonus program ("2022 Bonus Program"), including performance targets, for the current fiscal year to most of the Company's employees on active payroll in fiscal year 2022. Shares awarded under the program will be in the Company's RSUs ("Payout") and will be based on the final attainment of Company-wide performance targets which are tied to its operating plan for fiscal year 2022. Payout will vary linearly between 50%, 100% and 150% based on the achievement of these targets. In addition, the awards are subject to each recipient’s continuous service through each applicable vest date. In addition, certain employees were granted dollar bonus amounts, which are to be paid out in RSUs. The number of RSUs released will be determined using the average trading price of the Company's stock in the month prior to the Board's final certification of the Company's performance attainment and awards to be issued to each employee. The Company has accounted for these awards as liability-based awards, since the monetary value of the obligation associated with the award is based predominantly on a fixed monetary amount known at inception, and it has an unconditional obligation that it must or may settle by issuing a variable number of its equity shares. The Company will recognize stock-based compensation expense over the employees requisite service period, based on the expected attainment of the Company-wide targets as of the end of each reporting period. During the three and nine months ended September 30, 2022, the Company had recognized $3.9 million and $10.9 million, respectively, of stock-based compensation expense associated with the 2022 Bonus Program. Market-based Performance stock awards ("MPSUs") In September 2022, pursuant to the Company's 2019 Equity Incentive Plan, the Company granted certain employees shares of MPSUs, which are to vest upon the satisfaction of the Company’s achievement of specified Fastly Class A common stock price targets during the applicable performance period. In addition, the awards are subject to each recipient’s continuous service through each applicable vest dates. The Company determined the fair value and derived service period as of the grant date using a Monte Carlo simulation valuation model. For both the three and nine months ended September 30, 2022, the Company recognized $0.4 million of stock-based compensation expense associated with the MPSUs. Employee Share Purchase Program ("ESPP") The ESPP allows eligible employees to purchase shares of the Company's common stock through payroll deductions of up to 15% of their eligible compensation. The ESPP provides for six-month offering periods, commencing in May and November of each year. At the end of each offering period employees are able to purchase shares at 85% of the lower of the fair market value of the Company's common stock on the first trading day of the offering period or on the date of purchase. During the three and nine months ended September 30, 2022, the Company withheld $1.2 million and $1.2 million in contributions from employees, respectively, and recognized $0.5 million and $2.3 million in stock-based compensation expense related to the ESPP, respectively. During the three and nine months ended September 30, 2021, the Company withheld $3.5 million and $6.0 million in contributions from employees, respectively, and recognized $0.6 million and $2.7 million in stock-based compensation expense related to the ESPP, respectively. During the three and nine months ended September 30, 2022, 0.3 million shares of the Company's Class A common stock was purchased under the offering period that commenced on May 21, 2022. During the three and nine months ended September 30, 2021, 0.2 million shares of the Company's Class A common stock was purchased under the offering period that commenced on November 21, 2020 and May 20, 2021. Stock-based Compensation Expense The following table summarizes the components of total stock-based compensation expense included in the accompanying Condensed Consolidated Statements of Operations:
|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
|  | (in thousands)
Cost of revenue |  | $ | 2,978 |  |  | $ | 1,897 |  |  | $ | 9,112 |  |  | $ | 4,911 |
Research and development |  | 14,488 |  |  | 14,752 |  |  | 46,966 |  |  | 31,344 |
Sales and marketing |  | 10,920 |  |  | 9,121 |  |  | 31,198 |  |  | 19,760 |
General and administrative |  | 10,992 |  |  | 10,866 |  |  | 27,102 |  |  | 44,885 |
Total stock-based compensation expense |  | $ | 39,378 |  |  | $ | 36,636 |  |  | $ | 114,378 |  |  | $ | 100,900 |
For the three and nine months ended September 30, 2022, the Company capitalized $2.5 million and $6.0 million of stock-based compensation expense, respectively. For the three and nine months ended September 30, 2021, the Company capitalized $2.6 million and $3.4 million of stock-based compensation expense, respectively. For the three and nine months ended September 30, 2022, the Company recognized $5.6 million and $21.5 million of stock-based compensation expense associated with liability classified awards related to the 2022 Bonus Program and certain of the Company's Revest Shares that were modified, respectively. For the three and nine months ended September 30, 2021, the Company did not recognize any stock-based compensation expense associated with liability classified awards.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI https://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 https://asc.fasb.org/topic&trid=2228938 + Details
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