Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

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


	Year Ended December 31,
	2023		2022		2021
Cost of revenue	$	660	$	807	$	1,093
Sales and marketing	12,537		10,858		17,865
Research and development	35,352		30,985		34,230
General and administrative	35,686		34,306		54,070
Total stock-based compensation	$	84,235	$	76,956	$	107,258

2012 and 2014 Equity Incentive Plans

Prior to adoption of the 2021 Equity Incentive Plan (the “2021 Plan”), the Company granted awards under the 2012 Equity Incentive Plan (the “2012 Plan”) or the 2014 Equity Incentive Plan (the “2014 Plan”, and together with the “2012 Plan”, the “Prior Plans”). All awards currently are granted from the

2021 Plan. However, the Prior Plans continue to govern the terms and conditions of the outstanding awards previously granted under the 2012 Plan and 2014 Plan.

The Prior Plans permitted the grant of incentive stock options to employees and the grant of non-qualified stock options, restricted stock, restricted stock awards, RSUs, stock appreciation rights, performance units and performance shares to the Company’s employees, directors and consultants at the sole discretion of the board of directors. The Prior Plans also allowed for the administrator of the plan to include terms in an award agreement that the option holder may exercise in whole or part of the option prior to the full vesting of those options.

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 shares of Class B common stock under the Prior Plans.

2021 Equity Incentive Plan

In April 2021, the Company adopted 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, RSUs, 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 of Class A common stock 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 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) an 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 issued and outstanding on December 31 immediately prior to the date of increase or (b) such number of shares determined by the board of directors. Under the 2021 Plan, as of December 31, 2023, 25.9 million shares of Class A common stock were authorized, of which 15.6 million shares of Class A common stock were available for future issuance.

2021 Employee Stock Purchase Plan

In August 2021, the Company launched the ESPP. The ESPP provides for concurrent six-month offering and purchase periods beginning February 15 and August 15 of each year. The Company has initially reserved 1.3 million shares of its Class A common stock for issuance and sale under the ESPP. On January 1 of each of year, 2022 through 2031, the aggregate number of shares of Class A common stock reserved for issuance under the ESPP shall be increased automatically by the number of shares equal to 1% of the total number of outstanding shares of Class A common stock and shares of preferred stock of the Company (on an as converted to common stock basis) on the immediately preceding December 31; provided that the board of directors or compensation committee may in its sole discretion reduce the amount of the increase in any particular year. As of December 31, 2023, 3.0 million shares of Class A common stock were authorized of which 2.1 million shares of Class A common stock were available for future issuance.

The ESPP allows eligible employees the option to purchase shares of the Company's Class A common stock at a 15% discount through payroll deductions of their eligible compensation, subject to certain plan limitations. On each purchase date, eligible employees can purchase the Company’s Class A common stock at a price per share equal to 85% of the lesser of the fair value of the Company’s Class A

common stock on (i) the offering date or (ii) the purchase date. The offering date is the first day of any concurrent offering and purchase period, and the purchase date is the last day of any concurrent offering and purchase period. During the year ended December 31, 2023, 0.4 million shares of Class A common stock were purchased under the ESPP for an aggregate amount of $6.4 million. During the year ended December 31, 2022, 0.4 million shares of Class A common stock were purchased under the ESPP for an aggregate amount of $8.1 million. During the year ended December 31, 2021, no shares of Class A common stock were purchased under the ESPP.

For the ESPP, the Company recorded stock-based compensation expense of $2.1 million, $2.6 million, and $1.4 million during the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, there was $0.3 million of unrecognized stock-based compensation expense that is expected to be recognized over the remaining term of the offering period ending on February 14, 2024. As of December 31, 2023, the Company recorded a liability of $2.3 million related to the accumulated payroll deductions, which are refundable to employees who withdraw from the ESPP. This amount is included within accrued expenses in the Consolidated Balance Sheets.

Stock Options

Under the Prior Plans and the 2021 Plan (collectively, the “Plans”), options must be granted with exercise prices not less than the fair value of the underlying common stock on the date of grant. Options granted generally vest over periods of up to four years and expire ten years from the grant date. In 2019, the Company amended the terms and conditions of the Israeli Sub-Plan of the 2014 Plan. The Israeli Sub-Plan amendment allows the Company to grant options to Israeli employees or Israeli non-employees with exercise prices less than the fair value of the underlying common stock on the date of grant. The Company’s policy is to issue new shares of common stock upon the exercise of stock options.

A summary of the Company’s stock option activity under Plans for the year ended December 31, 2023 is as follows (in thousands, except weighted average information):


	Number of Options Outstanding	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2022	6,746	$	2.31	4.2	$	95,188
Granted	—	—
Exercised	(1,547)	2.44
Forfeited/Canceled	(40)	2.55
Outstanding at December 31, 2023	5,159	$	2.27	3.5	$	59,998
Exercisable at December 31, 2023	5,086	$	2.27	3.5	$	59,158

No stock options were granted by the Company during the years ended December 31, 2023 and 2022. The weighted-average grant date fair value per share of options granted for the year ended December 31, 2021 was $23.34. The total intrinsic value of options exercised in 2023, 2022, and 2021 was $22.2 million, $48.6 million, and $182.5 million, respectively. This intrinsic value represents the difference between the fair value of the Company’s common stock on the date of exercise and the exercise price of each option. During the year ended December 31, 2023, the tax benefit realized from stock option exercises was approximately $1.7 million.

The weighted average assumptions that were used to calculate the grant date fair value of the Company’s stock option grants for the year ended December 31, 2021 were as follows:


	2021
Expected dividend yield	—		%
Expected stock price volatility	58.0		%
Risk-free interest rate	1.0		%
Expected term (in years)	6.2
Fair value of common stock	$	25.10

During the years ended December 31, 2023, 2022, and 2021, the Company recorded stock-based compensation expense for stock option awards of $1.1 million, $2.8 million, and $4.3 million, respectively, under the Plans. As of December 31, 2023, total remaining stock-based compensation expense for unvested stock options is $1.1 million, which is expected to be recognized over a weighted average period of 0.6 years.

Restricted Stock Units

The Company has granted RSUs to certain employees and directors of the Company. RSUs granted prior to the Company’s Direct Listing 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 initial public offering 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 NYSE, 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.

On April 19, 2021, the Company also granted the CEO Performance Award, which provides for a grant of 1.4 million RSUs. 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 1.6%. 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, and the aggregate stock-based compensation expense was estimated to be $22.8 million over the derived service period of each tranche using a graded attribution method.

On December 21, 2023, the Company entered into the Cancellation Agreement with the CEO, which provided for the cancellation of the 1.4 million market-based RSUs included in the CEO Performance Award. As of the date of the Cancellation Agreement, none of the stock price targets set forth in the CEO Performance Award had been met so that all of the RSUs were unvested. The cancellation resulted in an acceleration of unrecognized stock-based compensation expense from future periods into the fourth quarter of 2023. Accordingly, a $7.5 million one-time non-cash expense was recorded in the year ended December 31, 2023 in general and administrative expenses within the Company’s Consolidated Statement of Operations. During the years ended December 31, 2023, 2022, and 2021, the Company recorded stock-based compensation expense of $13.3 million, $5.9 million, and $3.6 million, respectively, related to the CEO Performance Award.

On September 21, 2021, the Company’s former Chief Operating Officer (“COO”) resigned and entered into a transition and separation agreement with the Company, whereby all RSUs awarded to the former COO prior to the resignation will continue to vest for a certain period of time. This agreement resulted in modifications to the RSUs and options on the date of the separation agreement. Approximately $4.2 million of stock-based compensation expense was recognized by the Company during the year ended December 31, 2021 related to the modification of the awards, representing the incremental fair value of the awards on the date of the modification.

For all RSUs, excluding the CEO Performance Award and modification of the COO awards, the Company recorded stock-based compensation expense of $67.7 million, $65.6 million, and $93.9 million during the years ended December 31, 2023, 2022, and 2021, respectively.

A summary of the Company’s RSU activity for the year ended December 31, 2023 is as follows (in thousands, except weighted average information):


	Number of Shares	Weighted Average Grant Date Fair Value Per Share
Unvested at December 31, 2022	7,641	$	21.20
Granted	5,094	20.03
Vested	(3,078)	22.58
Forfeited/Canceled	(2,982)	19.31
Unvested at December 31, 2023	6,675	$	20.36

The weighted-average grant date fair value per share of RSUs granted for the years ended December 31, 2023, 2022, and 2021 were $20.03, $19.30, and $23.75, respectively. The total fair value of RSUs vested during the years ended December 31, 2023, 2022, and 2021 was $47.1 million, $48.1 million, and $79.8 million, respectively.

As of December 31, 2023, total unrecognized stock-based compensation expense for unvested RSUs was $128.9 million, which is expected to be recognized over a weighted average period of 1.4 years. The Company had no outstanding performance-based RSUs as of December 31, 2023.