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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2020
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation (a) General In connection with our IPO, our board of directors resolved not to make future grants under our 2011 Stock Option and Grant Plan (the 2011 Plan). The 2011 Plan will continue to govern outstanding awards granted thereunder. The 2011 Plan provided for the grant of qualified incentive stock options and nonqualified stock options or other awards such as restricted stock awards (RSAs) to our employees, officers, directors and outside consultants. In July 2015, our board of directors adopted and our stockholders approved our 2015 Equity Incentive Plan (the 2015 Plan). We initially reserved 800,000 shares of our common stock for the issuance of awards under the 2015 Plan plus the number of shares of common stock reserved for issuance under the 2011 Plan at the time the 2015 Plan became effective. The 2015 Plan also provides that (i) any shares subject to awards granted under the 2011 Plan that would have otherwise returned to the 2011 Plan (such as upon the expiration or termination of a stock award prior to vesting) will be added to, and available for issuance under, the 2015 Plan and (ii) the number of shares reserved and available for issuance under the 2015 Plan automatically increases each January 1, beginning on January 1, 2016, by 4% of the outstanding number of shares of our common stock on the immediately preceding December 31 (known as the “evergreen” provision) or such lesser number of shares as determined by our board of directors. Additionally, on October 8, 2015, our board of directors amended, effective as of the acquisition of Logentries, the 2015 Plan to reserve an additional 1,500,000 shares of our common stock for issuance of inducement awards. In February 2020, March 2019, March 2018, March 2017 and March 2016, we registered the increase in the number of shares authorized to be issued under the 2015 Plan by 1,996,444, 1,904,017 1,762,149, 1,702,187 and 1,661,616 shares, respectively, which represents the amount automatically added pursuant to the annual evergreen provision contained therein. As of December 31, 2020, the shares of common stock authorized to be issued under the 2015 Plan totaled 15,788,542 and there were 2,305,220 shares of common stock available for grant. We recognize stock-based compensation expense for all awards on a straight-line basis over the applicable vesting period, which is generally four years. Stock-based compensation expense for restricted stock, restricted stock units (RSUs), performance-based restricted stock units (PSUs), stock options and purchase rights issued under our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
| (in thousands)
Stock-based compensation expense: |  |  |  |  |
Cost of revenue | $ | 4,298 |  |  | $ | 2,580 |  |  | $ | 1,692 |
Research and development | 24,423 |  |  | 15,670 |  |  | 10,822 |
Sales and marketing | 16,826 |  |  | 11,883 |  |  | 7,569 |
General and administrative | 18,341 |  |  | 10,531 |  |  | 7,510 |
Total stock-based compensation expense | $ | 63,888 |  |  | $ | 40,664 |  |  | $ | 27,593 |
In the first quarter of 2020, our Compensation Committee adopted and approved the performance goals, targets and payout formulas for 2020 under our bonus plans, including permitting our executive officers and other employees the opportunity to receive payment of their earned bonuses for fiscal year 2020 in the form of common stock (in lieu of cash). For the year ended December 31, 2020, we recognized stock-based compensation expense related to such bonuses in the amount of $2.5 million, based on the performance attainment of the pre-established corporate financial objectives as of December 31, 2020. For all employees, including executive officers, who elected to receive their 2020 bonuses in the form of common stock (in lieu of cash), the payouts are expected to be made in the form of fully vested stock awards in the first quarter of 2021 pursuant to our 2015 Equity Incentive Plan, as amended. The number of shares underlying such awards shall be determined by dividing the dollar value of the actual bonus award payment by the closing price per share of our common stock on the date of grant. (b)Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Units Restricted stock, restricted stock unit and performance-based restricted stock unit activity during 2020, 2019 and 2018 was as follows:
| Restricted Stock |  | RSUs and PSUs
| Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value
Unvested balance as of December 31, 2017 | 210,083 |  |  | $ | 18.00 |  |  | 1,988,509 |  |  | $ | 14.77 |
Granted | — |  |  | — |  |  | 2,099,394 |  |  | 25.19 |
Vested | (187,706) |  |  | 18.80 |  |  | (973,443) |  |  | 17.41 |
Forfeited | (700) |  |  | 23.01 |  |  | (340,687) |  |  | 18.96 |
Unvested balance as of December 31, 2018 | 21,677 |  |  | 10.88 |  |  | 2,773,773 |  |  | 21.21 |
Granted | — |  |  | — |  |  | 1,740,299 |  |  | 43.34 |
Vested | (21,677) |  |  | 10.88 |  |  | (1,291,932) |  |  | 24.42 |
Forfeited | — |  |  | — |  |  | (285,216) |  |  | 26.14 |
Unvested balance as of December 31, 2019 | — |  |  | — |  |  | 2,936,924 |  |  | 32.43 |
Granted | — |  |  | — |  |  | 1,725,531 |  |  | 57.57 |
Vested | — |  |  | — |  |  | (1,451,618) |  |  | 33.66 |
Forfeited | — |  |  | — |  |  | (268,923) |  |  | 40.56 |
Unvested balance as of December 31, 2020 | — |  |  | $ | — |  |  | 2,941,914 |  |  | $ | 45.86 |
As of December 31, 2020, the unrecognized compensation cost related to shares of unvested RSUs and PSUs expected to vest was $121.9 million. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 2.3 years. (c)Stock Options The following table summarizes information about stock option activity during the reporting periods:
| Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (in years) |  | Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2017 | 4,684,954 |  |  | $ | 9.68 |  |  |  |  |
Granted | 107,850 |  |  | 24.44 |  |  |  |  |
Exercised | (944,658) |  |  | 8.05 |  |  |  |  | $ | 19,982 |
Forfeited/cancelled | (134,967) |  |  | 15.20 |  |  |  |  |
Outstanding as of December 31, 2018 | 3,713,179 |  |  | 10.32 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Exercised | (968,057) |  |  | 10.55 |  |  |  |  | $ | 39,526 |
Forfeited/cancelled | (9,730) |  |  | 13.53 |  |  |  |  |
Outstanding as of December 31, 2019 | 2,735,392 |  |  | 10.10 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Exercised | (783,645) |  |  | 9.98 |  |  |  |  | $ | 39,095 |
Forfeited/cancelled | (18,734) |  |  | 17.87 |  |  |  |  |
Outstanding as of December 31, 2020 | 1,933,013 |  |  | $ | 10.07 |  |  | 4.05 |  | $ | 154,816 |
Vested and exercisable as of December 31, 2020 | 1,844,721 |  |  | $ | 9.75 |  |  | 3.94 |  | $ | 148,339 |
As of December 31, 2020, the unrecognized compensation cost related to our unvested stock options expected to vest was $0.5 million. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 0.5 years. The total fair value of stock options vested in 2020, 2019 and 2018 was $2.2 million, $3.7 million and $5.1 million, respectively. The weighted-average grant date fair value per share of stock options granted in 2018 was $11.86 per share. (d)Employee Stock Purchase Plan On July 17, 2015, we filed a registration statement on Form S-8 with the Securities and Exchange Commission registering 800,000 shares of our common stock reserved under our 2015 Employee Stock Purchase Plan (ESPP). In February 2020, February 2019, March 2018, March 2017 and March 2016, we increased the number of shares to be authorized under the ESPP by 499,111, 476,004, 440,537, 425,547 and 415,404 shares, respectively, which represents the amount automatically added pursuant to the annual evergreen provision of the ESPP. As of December 31, 2020, the shares of common stock authorized to be issued under the ESPP totaled 3,056,603 and there were 1,824,947 shares of common stock available for grant. Under the ESPP, employees may set aside up to 15% of their gross earnings, on an after-tax basis, to purchase our common shares at a discounted price, which is calculated at 85% of the lesser of: (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date. The fair value of shares issued under our ESPP are estimated on the grant date using the Black-Scholes option pricing model. The expected term represents the term from the first day of the offering period to the purchase dates within each offering period. The expected volatility is based on the historical volatilities of our own common stock. The risk-free interest rate is based on U.S. Treasury zero-coupon securities with maturities consistent with the estimated expected term. We have not paid dividends on our common stock nor do we expect to pay dividends in the foreseeable future. The following table reflects the assumptions used in the Black-Scholes option pricing model to calculate the expense related to the ESPP:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Expected term (in years) | 0.5 - 1.0 |  | 0.5 - 1.0 |  | 0.5 - 1.0
Expected volatility | 47 - 53% |  | 44 - 55% |  | 37%
Risk-free interest rate | 0.1 – 0.3% |  | 1.9 – 2.5% |  | 2.0 – 2.6%
Expected dividend yield | — |  |  | — |  |  | — |
Grant date fair value per share | $9.63 – 22.30 |  | $14.17 –17.94 |  | $6.62 – 10.95
On March 15, 2018, we issued 123,607 shares of common stock to employees, with purchase prices of $12.96 and $14.78 per share, for aggregate proceeds of $1.6 million. On September 14, 2018, we issued 96,108 shares of common stock to employees, with purchase prices of $21.96 and $14.78 per share, for aggregate proceeds of $2.0 million. On March 15, 2019, we issued 110,822 shares of common stock to employees, with purchase prices of $30.46 and $21.96 per share, for aggregate proceeds of $2.6 million. On September 13, 2019, we issued 74,221 shares of common stock to employees, with purchase prices of $30.46 and $42.22 per share, for aggregate proceeds of $2.9 million. On March 15, 2020, we issued 101,806 shares of common stock to employees, with a purchase price of $32.87 per share, for aggregate proceeds of $3.3 million. On September 15, 2020, we issued 131,585 shares of common stock to employees, with a purchase price of the shares was $28.39 per share, for aggregate proceeds of $3.7 million.

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