Stock-Based Compensation

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

Total stock-based compensation expense is recorded in the Condensed Consolidated Statements of Operations as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of revenue	$	737	$	18	$	753	$	42
Sales and marketing	12,317		119		12,416		425
Research and development	18,573		712		19,398		1,573
General and administrative	32,739		497		33,025		1,264
Total stock-based compensation	$	64,366	$	1,346	$	65,592	$	3,304

2014 Equity Incentive Plan

Under the amended and restated certificate of incorporation, all outstanding options to purchase common stock became options to purchase an equivalent number of shares of Class B common stock and all RSUs became RSUs for an equivalent number of Class B common stock under the 2014 equity incentive plan.

2021 Equity Incentive Plan

In April 2021, the Company adopted the 2021 equity incentive plan (the “2021 Plan”), which became effective on May 14, 2021 in connection with the Direct Listing. The 2021 Plan permits the grant of incentive stock options to employees and the grant of non-qualified stock options, restricted stock, restricted stock awards, restricted stock units, stock appreciation rights, performance units, performance shares and stock bonus awards to the Company’s employees, directors, and consultants. Under the 2021 Plan, 10.7 million shares were initially reserved for issuance. The number of shares initially reserved for issuance pursuant to awards under the 2021 Plan will be increased by (i) (a) any reserved shares not issued or subject to outstanding awards granted under the Company’s 2012 and 2014 Equity Incentive Plans (collectively, the “Prior Plans”) that cease to be subject to such awards by forfeiture or otherwise after the effective date, (b) shares issued under the Prior Plans before or after the effective date pursuant to the exercise of stock options that are, after the effective date, forfeited, (c) shares issued under the Prior Plans that are repurchased by the Company at the original purchase price or are otherwise forfeited, and (d) shares that are subject to stock options or other awards under the Prior Plans that are used to pay the exercise price of a stock option or withheld to satisfy the tax withholding obligations related to any award and (ii) and annual increase on January 1st of each year beginning in 2022 through 2031, by the lesser of (a) 5% of the number of shares of all classes of the Company’s common stock issue and outstanding on December 31 immediately prior to the date of increase or (b) such number of shares determined by the Board. No grants have been issued under the 2021 Plan as of June 30, 2021.

Stock Options

A summary of the Company’s stock option activity under the 2012, 2014, and 2021 equity incentive plans (the “Plans”) is as follows (in thousands except weighted average information):


	Number of Options Outstanding	Weighted Average Exercise Price Per Share
Outstanding at December 31, 2020	19,373	$	2.09
Granted	114	2.00
Exercised	(7,132)	1.73
Forfeited/Canceled	(125)	3.96
Outstanding at June 30, 2021	12,230	$	2.28
Exercisable at June 30, 2021	10,844	$	2.01

As of June 30, 2021, total remaining stock-based compensation expense for unvested stock options is $6.1 million, which is expected to be recognized over a weighted average period of 1.2 years.

In the six months ended June 30, 2021, there were also 115,000 options exercised related to an equity grant outside of the Plans. In April 2021, the Company approved amendment of this grant outside of the Plans, and the amendment resulted in the vesting of an additional 50,000 options. The grantee’s remaining 100,000 unvested options were cancelled and a new grant for 32,500 RSUs was concurrently issued under the 2014 equity incentive plan by the Company, which was accounted for as a stock award modification. The incremental stock-based compensation expense recorded in the three and six months ended June 30, 2021 as a result of the modification was not material to the condensed consolidated financial statements.

Restricted Stock Units

The Company has granted RSUs to certain employees and directors of the Company. The granted RSUs vest upon the satisfaction of both a time-based service condition and a liquidity event requirement. The time-based service condition for these awards is generally satisfied over four years. The liquidity event requirement is satisfied upon the earliest to occur of a qualifying event, defined as a change of control transaction or after a set period of time following the effective date of the Company’s IPO pursuant to an effective registration statement under the Securities Act for the offer and sale of shares by the Company. A direct listing in which the Company did not sell its equity securities would not have satisfied the liquidity event performance condition; however, on April 19, 2021, the Company’s board of directors waived the liquidity event performance condition for the 6.9 million RSUs then outstanding so those that had satisfied the service condition would vest upon the earlier of the first day of trading of the Company’s common stock on the New York Stock Exchange, or March 15, 2022. As the satisfaction of the performance condition was not probable for accounting purposes prior to the waiver, the waiver of the liquidity event performance condition resulted in the remeasurement of the modified awards at fair value on the date of the waiver, which management estimated to be $25.04 per share or approximately $172.6 million. During the three and six months ended June 30, 2021, the Company recorded stock-based compensation expense of $63.4 million related to these RSUs.

On April 19, 2021, the Company also granted the CEO an RSU award, which provides for a grant of 1.4 million RSUs (“CEO Performance Award”). The CEO Performance Award consists of five vesting tranches with a vesting schedule based on achieving stock price targets ranging from $67.61 per share to $157.75, per share, which is calculated as the volume-weighted average over a 30-day trading window

following the first day the Company becomes a publicly traded company, as well as satisfying certain minimum service requirements of one to five years. The award expires ten years after the grant date.


Tranche	Number of RSUs Eligible to Vest	Company Stock Price Target	Minimum Service Period (in years)
1	279,600	$67.61	1
2	279,600	$82.63	2
3	279,600	$102.66	3
4	279,600	$127.70	4
5	279,600	$157.75	5

The Company estimated the grant date fair value of this award using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation. A Monte Carlo simulation model also was used to estimate a derived service period for each of the five vesting tranches, which is the measure of the expected time to achieve each of the stock price targets. The various assumptions used in the Monte Carlo simulation included an expected dividend yield of zero, expected term of ten years, estimated volatility of 59%, and a risk-free interest rate of 2%. Using these inputs, the weighted average grant date fair value was estimated to be $16.34 per share. The weighted average derived service period of each tranche was estimated to be 4.1 years and ranged from 3.2 to 5.0 years.

The Company will recognize aggregate stock-based compensation expense of $22.8 million over the derived service period of each tranche using a graded attribution method. During the three and six months ended June 30, 2021, the Company recorded stock-based compensation expense of $0.6 million related to the CEO Performance Award.

A summary of the Company’s RSU activity for the six months ended June 30, 2021 is as follows (in thousands, except weighted average information):


	Number of Shares	Weighted Average Grant Date Fair Value Per Share
Unvested at December 31, 2020	5,451	$	5.75
Granted	3,010	19.85
Vested	(2,278)	7.77
Forfeited/Canceled	(206)	6.60
Unvested at June 30, 2021	5,977	$	14.08

As of June 30, 2021, total unrecognized stock-based compensation expense for RSUs associated with the CEO Performance Award was $22.2 million, which is expected to be recognized over a weighted average period of 3.9 years. For the remaining RSUs, total unrecognized stock-based compensation expense for unvested RSUs was $108.2 million, which is expected to be recognized over a weighted average period of 1.5 years.