Stock-Based Compensation Expense

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

(a)General

Stock-based compensation expense for restricted stock units (RSUs), performance-based restricted stock units (PSUs), stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Stock-based compensation expense:
Cost of revenue	$	1,554	$	931
Research and development	7,815		4,645
Sales and marketing	5,746		3,678
General and administrative	5,747		4,093
Total stock-based compensation expense	$	20,862	$	13,347

We recognize compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally four years.

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2021 and 2020 bonus plans, including permitting our executive officers and certain other employees the opportunity to receive payment of their earned bonuses in the form of common stock (in lieu of cash). During the three months ended March 31, 2021 and 2020, we recognized stock-based compensation expense related to such bonuses in the amount of $1.0 million and $0.4 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of March 31, 2021 and 2020. For all employees, including executive officers, who elect to receive their 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 the following year pursuant to our 2015 Equity Incentive Plan, as amended. The number of shares underlying such awards is 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 Units and Performance-Based Restricted Stock Units

RSUs and PSUs activity during the three months ended March 31, 2021 was as follows:


	Shares	Weighted-Average Grant Date Fair Value
Unvested balance as of December 31, 2020	2,941,914	$	45.86
Granted	1,447,632	88.64
Vested	(374,579)	33.20
Forfeited	(61,704)	52.67
Unvested balance as of March 31, 2021	3,953,263	$	62.61

As of March 31, 2021, the unrecognized compensation expense related to our unvested RSUs and PSUs was $228.8 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.8 years.

(c)Stock Options

Stock option activity during the three months ended March 31, 2021 was as follows:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2020	1,933,013	$	10.07
Granted	—	—
Exercised	(170,006)	8.34			$	12,550
Forfeited/cancelled	—	—
Outstanding as of March 31, 2021	1,763,007	$	10.24	3.9	$	113,492
Vested and exercisable as of March 31, 2021	1,736,419	$	10.04	3.8	$	112,127

As of March 31, 2021, the unrecognized compensation expense related to our unvested stock options was $0.3 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 0.8 years.

The total fair value of stock options vested in the three months ended March 31, 2021 was $0.4 million.

(d)Employee Stock Purchase Plan

Under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (ESPP), employees may set aside up to 15% of their gross earnings, on an after-tax basis, to purchase our common stock 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.

On March 15, 2021, we issued 147,837 shares of common stock to employees, with purchase prices of $28.39 or $52.60 per share, for aggregate proceeds of $4.5 million.