8. Stock-Based Compensation

The Company’s 2008 Stock Incentive Plan, as amended (the “2008 Plan”), provided for the Company to issue equity awards to employees, consultants, advisors and directors. Under the 2008 Plan, the Company could grant stock-based incentive awards, including incentive or nonqualified stock options and restricted stock units, as determined by the board of directors.

The total number of shares of common stock that could have been issued under the 2008 Plan was 8,440,712 shares. Upon effectiveness of the Company’s 2018 Equity Incentive Plan, (the “2018 Plan” and, together with the 2008 Plan, the “Plans”) on June 27, 2018, the remaining 583,056 shares that were available for grant under the 2008 Plan became available for grant under the 2018 Plan and no future grants will be made under the 2008 Plan. Additionally, shares underlying awards under the 2008 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, in the case of incentive stock options, to any limitations of the Internal Revenue Code) will be available for future grants under the 2018 Plan.

Shares of common stock issued upon exercise of stock options granted prior to September 8, 2017 will be issued as either Class A common stock or Class B common stock. Shares of common stock issued upon exercise of stock options granted after September 8, 2017 will be issued as Class A common stock.

2018 Equity Incentive Plan

On June 14, 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Plan, which became effective on June 27, 2018. The 2018 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares initially reserved for issuance under the 2018 Plan is the sum of 2,149,480 shares of Class A common stock, plus the number of shares (up to 5,028,832 shares) equal to the sum of (i) the 583,056 shares of Class A common stock and Class B common stock that were available for grant under the 2008 Plan upon the effectiveness of the 2018 Plan and (ii) the number of shares of Class A common stock and Class B common stock subject to outstanding awards under the 2008 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, in the case of incentive stock options, to any limitations of the Internal Revenue Code). The number of shares of Class A common stock that may be issued under the 2018 Plan will automatically increase on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the least of (i) 2,500,000 shares of Class A common stock; (ii) 5% of the sum of the number of shares of Class A common stock and Class B common stock outstanding on the first day of such fiscal year; and (iii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by the Company under the 2018 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan. As of December 31, 2018, 583,082 shares remain available for future grants under the 2018 Plan. The number of authorized shares reserved for issuance under the 2018 Plan was increased by 1,261,257 shares effective as of January 1, 2019 in accordance with the provisions of the 2018 Plan described above.

Options and restricted stock units granted under the Plans vest over periods determined by the board of directors. Options granted under the Plans expire no longer than ten years from the date of the grant. The exercise price for stock options granted is not less than the fair value of common shares as determined by the board of directors as of the date of grant. Prior to the Company’s IPO, the Company’s board of directors valued the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant. Subsequent to the IPO, the fair value of the Company’s Class A common stock is based on quoted market prices.

Stock Option Valuation

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company, historically, has been a private company and lacks company-specific historical and implied volatility information. Therefore, the Company estimates its expected stock volatility based on the historical volatility of its publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The relevant data used to determine the value of the stock option grants for employees and directors for the years ended December 31, 2018 and 2017 is as follows, presented on a weighted-average basis:


	Year Ended December 31,
	2018			2017
Risk-free interest rate		2.79	%		2.03	%
Expected volatility		49.66	%		47.00	%
Expected dividend yield		0	%		0	%
Expected term (in years)		5.73			6.08

Stock Option Activity

The following table summarizes the Company’s option activity since December 31, 2017:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2017		3,535,560		$	4.74		7.30	$	8,895
Granted		1,342,840			10.40
Exercised		(601,018	)		1.43
Forfeited		(507,296	)		7.51

Outstanding as of December 31, 2018		3,770,086		$	6.91		7.44	$	1,956

Vested and expected to vest as of December 31, 2018		3,436,473		$	6.70		7.34	$	1,938

Options exercisable as of December 31, 2018		1,910,882		$	4.90		6.36	$	1,938

As of December 31, 2018, outstanding options of 1,383,428 were for the purchase of Class A common stock and outstanding options of 2,386,658 were for the purchase of either Class A common stock or Class B common stock.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had strike prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of options exercised during the years ended December 31, 2018 and 2017 was $1.7 million and $1.4 million, respectively. The weighted average grant-date fair value of awards granted to employees and directors during the years ended December 31, 2018 and 2017 was $5.09 per share and $3.28 per share, respectively.

Restricted Stock Units

The following table summarizes the Company’s RSU activity since December 31, 2017:


	Number of Shares			Weighted Average Grant-Date Fair Value
Unvested balance December 31, 2017		242,496		$	6.90
Granted		2,378,578			16.76
Vested		(208,081	)		14.40
Forfeited		(3,100	)		14.75

Unvested balance December 31, 2018		2,409,893		$	15.98

The unvested balance includes 129,750 RSUs with a grant-date fair value of $2.3 million that contain service-based and performance-based vesting conditions for which performance has been deemed not probable and therefore the Company has not yet recorded expense. The RSUs vest in three equal annual installments upon the achievement of certain Company-specific goals in each of the next three years.

Stock-Based Compensation

Stock-based compensation expense for the year ended December 31, 2018 includes $1.7 million of stock-based compensation expense related to performance-based RSU grants for which achievement of the performance condition was deemed to be probable during the year ended December 31, 2018. The Company recorded stock-based compensation expense in the following expense categories of its statements of operations and comprehensive loss (in thousands):


	Year Ended December 31,
	2018		2017
Cost of revenue	$	42	$	27
Sales and marketing		1,955		789
Research and development		2,011		467
General and administrative		3,113		577

	$	7,121	$	1,860

As of December 31, 2018, net unrecognized compensation expense related to unvested options was $7.7 million, which is expected to be recognized over a weighted average period of 3.2 years. As of December 31, 2018, net unrecognized compensation expense related to unvested RSUs was $32.5 million, which is expected to be recognized over a weighted average period of 5.5 years.