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Stockholders' Equity | 9 Months Ended
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Sep. 30, 2024
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 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. The Signal Plan includes 251,754 registered shares which can be exercised to purchase shares of Fastly’s common stock. As of September 30, 2024 and December 31, 2023, there were 6.4 million and 8.9 million shares of common stock available for issuance under the 2019 Plan, respectively. As of September 30, 2024 and December 31, 2023, 140.1 million and 133.0 million shares of common stock were issued and outstanding, respectively. Stock Options Options granted under the 2011 Plan and 2019 Plan are exercisable for 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. Forfeitures are recognized as they occur. The following table summarizes stock option activity during the nine months ended September 30, 2024:
|  | Shares |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term |  | Aggregate Intrinsic Value
|  | (in thousands) |  |  |  | (in years) |  | (in thousands)
Outstanding at December 31, 2023 |  | 2,710 |  |  | 8.14 |  | 5.1 |  | $ | 26,383 |
Granted |  | — |  |  | — |  |  |  |  |
Exercised |  | (125) |  |  | 2.48 |  |  |  |
Cancelled/forfeited |  | (33) |  |  | 11.92 |  |  |  |  |
Outstanding at September 30, 2024 |  | 2,552 |  |  | 8.38 |  | 4.2 |  | $ | 5,466 |
Vested and exercisable at September 30, 2024 |  | 2,100 |  |  | 6.63 |  | 3.2 |  | $ | 5,466 |
During the three months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense from stock options of approximately $0.4 million and $0.2 million, respectively. During the nine months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense from stock options of approximately $1.5 million and $1.3 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 three or four years, at the rate of 33% or 25%, respectively, on the first anniversary of the vesting start date and ratably on a quarterly basis over the remaining 24-month or 36-month period thereafter, respectively. RSUs granted to existing employees typically vest in equal quarterly installments over a three or 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, 2024:
|  | Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Unvested RSUs as of December 31, 2023 |  | 11,244 |  |  | $ | 17.46 |
Granted |  | 9,813 |  |  | 11.83 |
Vested |  | (6,180) |  |  | 16.95 |
Cancelled/forfeited |  | (1,116) |  |  | 17.51 |
Unvested RSUs as of September 30, 2024 |  | 13,761 |  |  | $ | 13.73 |
During the three months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense related to RSUs of $23.8 million and $28.7 million, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense related to RSUs of $74.2 million and $79.7 million, respectively. Performance-Based Restricted Stock Units (“PSUs”) Performance stock awards for executive officers (“Executive PSUs”) In March and May 2023, 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 2023. 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. In February 2024, 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 2024. 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.
|  | Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Nonvested PSUs as of December 31, 2023 |  | 732 |  |  | $ | 16.49 |
Granted |  | 909 |  |  | 12.60 |
Vested |  | (239) |  |  | 16.41 |
Cancelled/forfeited |  | (271) |  |  | 16.43 |
Nonvested PSUs as of September 30, 2024 |  | 1,131 |  |  | $ | 13.40 |
For the three months ended September 30, 2024 and 2023, the Company recognized $0.8 million and $1.5 million of stock-based compensation expense associated with these awards, respectively. For the nine months ended September 30, 2024 and 2023, the Company recognized $2.7 million and $3.2 million of stock-based compensation expense associated with these awards, respectively. Company-wide Bonus Program (“Bonus Program”) In March 2023, the Compensation Committee approved a company-wide bonus program, including performance targets, to most of the Company’s employees on active payroll in fiscal year 2023 (“2023 Bonus Program”). Shares awarded under the program were paid out in February 2024 in fully vested RSUs and based on the final attainment of Company-wide performance targets which were tied to its operating plan for fiscal year 2023. The Company recognized stock-based compensation expense over the employees requisite service period, based on the final attainment of the Company-wide targets. In February 2024, the Company paid out 1.9 million of restricted stock units associated with the 2023 Bonus Program, and correspondingly recorded a charge to additional paid-in-capital of $26.8 million. In February 2024, the Compensation Committee approved a company-wide bonus program, including performance targets, for the current fiscal year to most of the Company’s employees on active payroll in fiscal year 2024 ("2024 Bonus Program"). Shares awarded under the program will be in fully vested RSUs and will be based on the final attainment of Company-wide performance targets which are tied to its operating plan for fiscal year 2024. The payout of the 2024 Company-wide bonus program will vary linearly between 50%, 100% and 150% based on the achievement of these targets. Employees are required to be employed through the payout date to earn the awards. 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 is recognizing the 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 months ended September 30, 2024 and 2023, the Company recognized $1.5 million and $6.6 million of stock-based compensation expense associated with the Bonus Programs, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $8.0 million and $15.6 million of stock-based compensation expense associated with the Bonus Programs, respectively. Market-Based Performance Stock Awards (“MPSUs”) In September 2022 and January 2023, 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 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.
|  | Number of Shares |  | Weighted-Average Grant Date Fair Value Per Share
|  | (in thousands) |  |
Nonvested MPSUs as of December 31, 2023 |  | 1,471 |  |  | $ | 6.46 |
Granted |  | — |  |  | — |
Vested |  | — |  |  | — |
Cancelled/forfeited |  | (158) |  |  | 6.56 |
Nonvested MPSUs as of September 30, 2024 |  | 1,313 |  |  | $ | 6.45 |
Stock-based compensation expense relating to the MPSUs are recognized using the accelerated attribution method over the derived service period. During the three months ended September 30, 2024 and 2023, the Company recognized $0.7 million and $1.5 million stock-based compensation expense associated with these awards, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $2.2 million and $4.9 million stock-based compensation expense associated with these awards, respectively. Employee Stock 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 months ended September 30, 2024 and 2023 the Company recognized $0.3 million and $0.8 million in stock-based compensation expense related to the ESPP, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized $2.3 million and $3.1 million in stock-based compensation expense related to the ESPP, respectively. During the nine months ended September 30, 2024, 0.5 million shares of the Company’s common stock was purchased under the offering period that commenced in November 2023. During the nine months ended September 30, 2023, 0.7 million shares of the Company’s common stock were purchased under the offering period that commenced in November 2022. No shares of the Company’s common stock were purchased for either the three months ended September 30, 2024 or 2023. Equity Awards Modification There were no material equity modifications during the three and nine months ended September 30, 2024. In September 2023, as part of one employee's separation and transition plan, the Company modified this employee's outstanding equity awards in an amount that would have vested if this individual had remained an employee for an additional period of time. As a result of the modification, the Company recognized stock-based compensation expense of $0.4 million for the three and nine months ended September 30, 2023. 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,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
|  | (in thousands)
Cost of revenue |  | $ | 1,911 |  |  | $ | 2,860 |  |  | $ | 6,734 |  |  | $ | 8,378 |
Research and development |  | 7,378 |  |  | 12,122 |  |  | 25,684 |  |  | 35,808 |
Sales and marketing |  | 7,113 |  |  | 9,061 |  |  | 22,014 |  |  | 25,643 |
General and administrative |  | 8,614 |  |  | 11,670 |  |  | 28,553 |  |  | 31,027 |
Total stock-based compensation expense |  | $ | 25,016 |  |  | $ | 35,713 |  |  | $ | 82,985 |  |  | $ | 100,856 |
For the three months ended September 30, 2024 and 2023, the Company capitalized $2.5 million and $3.7 million of stock-based compensation expense, respectively. For the nine months ended September 30, 2024 and 2023, the Company capitalized $8.0 million and $6.9 million of stock-based compensation expense, respectively. For the three months ended September 30, 2024 and 2023, the Company recognized $1.5 million and $6.6 million of stock-based compensation expense associated with the liability classified awards related to the company-wide Bonus Program, respectively. For the nine months ended September 30, 2024 and 2023, the Company recognized $8.0 million and $15.6 million of stock-based compensation expense associated with liability classified awards related to the company-wide Bonus Program, respectively.

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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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