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STOCK INCENTIVE PLANS | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
STOCK INCENTIVE PLANS | STOCK INCENTIVE PLANS2009 and 2019 Stock Option Plans – In 2009, the Company’s Board of Directors approved the adoption of a stock plan (the 2009 Stock Plan). As amended in 2015, the 2009 Stock Plan permitted the Company to grant awards covering up to 16,495,150 shares of the Company’s common stock. In January 2018, the Company increased the number of shares of common stock reserved under the 2009 Stock Plan by 535,130 shares, from 16,495,150 shares to 17,030,280. In April 2019, the Company approved the adoption of a new stock plan (the 2019 Stock Plan). The 2019 Stock Plan permits the Company to grant up to 8,173,970 additional shares, increasing the overall common stock reserved for grant to 25,204,250 shares. In September 2021, under the 2019 Stock Plan, the Company's Board of Directors approved and authorized 8,679,380 restricted stock units to be granted, which consisted of an aggregate of 4,339,690 shares of each of Class A and LT50 common stock effective as of immediately prior to the effectiveness of the Company's IPO Registration Statement on November 9, 2021. On November 9, 2021, the Company increased the common stock reserved for issuance under the 2019 Stock Plan, as amended and restated, to an aggregate of 16,856,770 shares of the Company's LT50 and Class A common stock. Following the completion of the IPO, the Company did not and will not make any further grants under the 2009 Stock Plan or 2019 Stock Plan. However, these stock plans will continue to govern the terms and conditions of the outstanding awards granted under the 2009 Stock Plan and 2019 Stock Plan. Upon the expiration, forfeiture, cancellation, withholding of shares upon exercise or settlement of an award to satisfy the exercise price or tax withholding, or repurchase of any shares of Class A common stock underlying outstanding stock-based awards granted under the 2009 Stock Plan or of Class A or LT50 common stock underlying outstanding stock-based awards granted under the 2019 Stock Plan, an equal number of shares of Class A common stock will become available for grant under the 2021 Incentive Award Plan (2021 Plan) and 2021 Employee Stock Purchase and Matching Plan (ESPP and together with the 2021 Plan, the 2021 Incentive Plans) that was established immediately before the effectiveness of the IPO Registration Statement. 2021 Incentive Plans – In November 2021, the Company’s Board of Directors adopted, and its stockholders approved, the 2021 Incentive Plans, which both became effective immediately before the effectiveness of the IPO Registration Statement and use a combined share reserve. Under the 2021 Incentive Plans, 11,676,932 shares of the Company's Class A common stock are reserved for issuance pursuant to a variety of stock-based awards, including incentive stock options, nonqualified stock options, stock appreciation rights (SARs), restricted stock awards, RSUs, and other forms of equity and cash compensation under the 2021 Plan and purchase rights and matching awards under the ESPP. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2021 Incentive Plans will be increased by the number of shares represented by awards outstanding under the 2009 Stock Plan and 2019 Stock Plan that become available for issuance following the effective date for certain reasons that include but not limited to expiration, cancellation or repurchase by the Company and will automatically increase each January 1, beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (A) 6% of the aggregate number of shares of all classes of the Company's common stock outstanding on the immediately preceding calendar year, or (B) such lesser number of shares as determined by the Company’s board of directors or compensation committee; provided, however, that no more than 87,576,990 shares of stock may be issued upon the exercise of incentive stock options. ESPP – The offering periods of the ESPP are three months long beginning on each March 15, June 15, September 15 and December 15 of each fiscal quarter, except for the initial offering period. The enrollment date for each offering period shall be the first day of the offering period, and the exercise date of each offering period shall be the last day of the offering period. The initial offering period will begin on March 15, 2022 with the first offering period thereunder ending on June 14, 2022. The price at which Class A common stock is purchased under the ESPP will be equal to the average of the high and low fair market value of a share of the Company’s Class A common stock as of the last day of the offering period. At the end of each offering period, the Company may provide a discretionary match up to 1/10 of a share of the Company's Class A common stock for each share of Class A common stock purchased by or issued to an employee under the ESPP that is retained through the end of the applicable offering period. No fractional shares will be issued by the Company. The Company will round to the nearest full share for shares purchased by an employee as well as any matched shares issued to an employee under the ESPP. The match rate applicable to each offering period shall be limited to 1.5% of the shares of any class of Company capital stock outstanding as of the exercise date applicable to such offering period. The Company will estimate the fair value of matched shares provided by the Company under the ESPP using the Black-Scholes option-pricing model on the date of grant. The Company will recognize stock-based expense related to the matched shares provided by the Company pursuant to its ESPP on a straight-line basis over the offering period, which is typically three months. As of December 31, 2021, no Class A common stock has been issued or purchased by employees under the ESPP. Restricted Stock Units – The 2019 Stock Plan and the 2021 Plan authorize the grant of RSUs. No RSUs were granted as of December 31, 2020 for either plan. In September 2021, under the 2019 Stock Plan, the Company's Board of Directors approved and authorized 8,679,380 restricted stock units to be granted, which consisted of an aggregate of 4,339,690 shares of each of Class A and LT50 common stock effective as of immediately prior to the effectiveness of the Company's IPO Registration Statement on November 9, 2021. Of this total, 2,980,260 RSUs, comprised of 1,490,130 shares of each of Class A and LT50 common stock were considered granted for accounting purposes in September 2021 to the Company's named executive officers and certain members of management as the Company and these certain employees had a mutual understanding of the key terms and conditions of the award on the board approval date, which occurred on September 24, 2021. RSUs granted to employees in September 2021 vest upon the satisfaction of both a performance and service condition. The performance condition was satisfied immediately prior to the effectiveness of the IPO Registration Statement, which occurred on November 9, 2021. The service condition for these awards is satisfied over eight years with a cliff vest for 1/8 of the grant on September 15, 2022 and quarterly vesting of 1/32 of the grant every December 15, March 15, June 15 and September 15 thereafter until fully vested. In November 2021, the Company granted 5,666,260 RSUs, comprised of 2,833,130 shares of each of Class A common stock and LT50 common stock, to certain employees that were not included in the September RSU grant. These RSUs only have a service condition, which is equivalent with the service condition of the awards granted in September 2021, and were deemed granted for accounting purposes on November 10, 2021, the date these certain employees had a mutual understanding of the key terms and conditions of the award. Pursuant to the Company’s Non-Employee Director Compensation Program adopted under the 2021 Incentive Plans upon closing of the IPO, the Company granted 27,780 RSUs in total of shares of Class A common stock to members of the Company's audit committee during November 2021 in connection with each member's initial appointment to the Board of Directors and consummation of the IPO. For accounting purposes, the grant date was considered to be November 12, 2021 as this was the date the Company filed its IPO price pursuant to Rule 424(b)(4). The IPO price was a key determination of the number of RSUs awarded to members of the Audit Committee and therefore on this date the Company and each Audit Committee member had a mutual understanding of the key terms and conditions of the awards granted. The RSUs granted vest upon the earlier of the satisfaction of a service condition or a performance condition, which is considered a change in control event. The service condition for these awards is satisfied over three years with quarterly vesting of the grant until fully vested. During the year ended December 31, 2021, RSU activity was as follows:
| Class A Common Stock(1) |  | LT50 Common Stock(1) |  | Weighted average grant date fair value per share
Outstanding at December 31, 2020 | — |  |  | — |  |  | $ | — |
RSUs granted | 4,351,040 |  |  | 4,323,260 |  |  | $ | 33.79 |
RSUs vested | — |  |  | — |  |  | $ | — |
RSUs cancelled/forfeited/expired | (21,510) |  |  | (21,510) |  |  | $ | 41.06 |
Outstanding at December 31, 2021 | 4,329,530 |  |  | 4,301,750 |  |  | $ | 33.75 |
(1)Class A common stock and LT50 common stock both became effective on November 9, 2021, which is the date of effectiveness of the Company's IPO Registration Statement. As of December 31, 2021, there was $282.0 million of unamortized stock-based compensation cost related to unvested RSUs, which is expected to be recognized over the remaining weighted average life of 6.92 years. Stock Options – Both stock plans provide for the grant of incentive and nonstatutory stock options to employees, nonemployee directors and consultants of the Company. Under the stock plans, the exercise price of incentive stock options must be at least equal to 110% of the fair value of the common stock on the grant date for a “ten-percent holder” or 100% of the fair value of the common stock on the grant date for any other employee. The exercise price of nonstatutory options granted must be at least equal to 100% of the fair value of the Company’s common stock on the date of grant. Under both stock plans, most options typically vest over four years and are exercisable at any time after the grant date. Each employee has the right to exercise unvested stock options for restricted common stock. However, if the employee is terminated either voluntarily or involuntarily prior to all of the exercised options vesting, the Company has the right to repurchase the unvested early exercised shares at the original purchase price. Early exercises of options are not deemed to be substantive exercises for accounting purposes and accordingly, amounts received for early exercises are recorded as a liability. These repurchase terms are considered to be a forfeiture provision and do not result in variable accounting. During the year ended December 31, 2019, the Company repurchased 55,200 shares of exercised unvested common stock, for $1,794,703, of which $13,919 of the exercise cost of the repurchase was recorded within Additional paid-in capital and the remaining $1,780,784 of the repurchase was recorded as stock-based compensation expense. There were no repurchases of common stock during the years ended December 31, 2021 and 2020. As of December 31, 2021, there were 1,437,760 shares subject to repurchase related to stock options early exercised and not yet vested, but that are expected to vest. As of December 31, 2021, the Company recorded a liability related to these shares subject to repurchase in the amount of $2.4 million, which is included within Accrued expenses and other liabilities in the accompanying consolidated balance sheets. These amounts are reclassified to common stock and additional paid in capital as the underlying shares vest. There were no early exercised shares subject to repurchase as of December 31, 2020. During the year ended December 31, 2020, by mutual agreement, the Company modified the terms and conditions of certain stock option awards originally granted in 2019 by cancelling the original awards granted and reissuing new stock option awards on new grant dates during the year ended December 31, 2020 with an increased fair value per share on the awards on the new grant date. As a result of the modification, only the grant date changed. All vesting conditions, number of shares granted in the stock option awards and contractual terms of the stock options remained the same. The Company treated these changes to the stock option awards as modifications of the terms and conditions of an equity award. The modification impacted certain stock option awards of 42 employees of the Company. During the year ended December 31, 2020, the modification had an immaterial impact on stock-based compensation expense and the consolidated financial statements. A summary of the Company's stock option activity was as follows:
| Shares |  | Weighted average exercise price per share |  | Weighted average remaining contractual life (in years)
Outstanding at December 31, 2019 | 15,545,850 |  |  |  |  |
Options granted | 1,638,020 |  |  | $ | 2.11 |  |  |
Options exercised | (2,777,010) |  |  | $ | 0.47 |  |  |
Options cancelled/forfeited/expired | (894,040) |  |  | $ | 2.57 |  |  |
Outstanding at December 31, 2020 | 13,512,820 |  |  | $ | 0.78 |  |  | 6.35
Exercisable at December 31, 2020 | 13,222,800 |  |  | $ | 0.78 |  |  | 6.31
Options granted | 962,080 |  |  | $ | 8.90 |  |  |
Options exercised | (6,965,767) |  |  | $ | 0.94 |  |  |
Options cancelled/forfeited/expired | (315,940) |  |  | $ | 1.61 |  |  |
Outstanding at December 31, 2021 | 7,193,193 |  |  | $ | 1.87 |  |  | 6.45
Exercisable at December 31, 2021 | 7,001,403 |  |  | $ | 1.81 |  |  | 6.31
The total pretax intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $80.7 million, $11.3 million and $4.7 million, respectively. The total pretax intrinsic value of options outstanding at December 31, 2021, 2020 and 2019 was $302.8 million, $86.8 million and $40.4 million, respectively. The intrinsic value is the difference between the estimated fair value of the Company’s common stock at the date of exercise and the exercise price for in-the-money options. The weighted average grant date fair value of options granted during the years ended December 31, 2021, 2020 and 2019 was $6.87, $1.69 and$1.65, respectively. As of December 31, 2021, there was $13.2 million of unrecognized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 1.7 years. As of December 31, 2020, there was $10.8 million of unrecognized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 3.70 years. Cash received from option exercises and purchases of shares under the stock plans for the years ended December 31, 2021, 2020 and 2019 was $3.5 million, $1.3 million and $0.5 million, respectively. The fair value of option grants was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
| Year ended December 31,
| 2021 |  | 2020 |  | 2019
Fair value of common stock per share | $ | 12.16 |  |  | $ | 2.66 |  |  | $ | 2.40 |
Exercise price per share | $ | 8.90 |  |  | $ | 2.11 |  |  | $ | 1.02 |
Expected dividend yield (1) | — | % |  | — | % |  | — | %
Risk-free interest rate (2) | 1.1 | % |  | 0.6 | % |  | 2.4 | %
Expected volatility (3) | 51.5 | % |  | 50.5 | % |  | 42.5 | %
Expected life (in years) (4) | 5.98 |  | 5.80 |  | 6.20
(1)The Company has no history or expectation of paying cash dividends on its common stock. (2)The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. (3)The Company estimates the volatility of its common stock at the date of grant based on the expected weighted-average volatility for a group of publicly traded companies in a similar industry or with similar service offerings, with a term of one year or greater. There have been no grants of stock options after the completion of the IPO. (4)The expected life of stock options granted under the option plans is determined using the simplified method, which deems the expected life to be the average of the time-to-vesting and the contractual life of the stock-based awards. The expected life represents the period of time that options granted are expected to be outstanding. Stock-Based Compensation The following table summarizes the stock-based compensation expense recognized for the different stock incentive plans discussed above (in thousands):
| Years ended December 31, |
| 2021 |  | 2020 |  | 2019 |
Stock options | $ | 3,425 |  |  | $ | 2,582 |  |  | $ | 3,487 |  |
Secondary sales of common stock | — |  |  | 15,255 |  |  | — |  |
Restricted stock units | 11,149 |  |  | — |  |  | — |  |
Total | $ | 14,574 |  |  | $ | 17,837 |  |  | $ | 3,487 |  |
Stock-based compensation expense is allocated based on the cost center to which the award holder spent time during the reported periods. Stock-based compensation is included in the following components of expenses on the accompanying consolidated statements of income (in thousands):
| Years ended December 31,
| 2021 |  | 2020 |  | 2019
Cost of revenue, net | $ | 4,115 |  |  | $ | 2,272 |  |  | $ | 846 |
Research and development | 1,617 |  |  | 2,469 |  |  | 741 |
General and administrative | 7,356 |  |  | 12,648 |  |  | 1,496 |
Sales and marketing | 1,486 |  |  | 448 |  |  | 404 |
Total | $ | 14,574 |  |  | $ | 17,837 |  |  | $ | 3,487 |
During the year ended December 31, 2019, $1.8 million of stock-based compensation expense for the repurchase of unvested early exercised shares during the period was included on the consolidated statements of income; however, as the excess of the repurchase price over the fair value of the shares was determined to be a cash bonus, it was not included within Additional paid-in capital as of and for the year ended December 31, 2019. During the year ended December 31, 2020, the Company's Chief Executive Officer, David Barrett, sold a portion of his common stock to new investors. Due to the Company’s involvement in the transaction, the sale of common stock was determined to be compensatory, and the Company recorded $11.1 million to stock-based compensation expense for the sale price in excess of fair value. Stock-based compensation expense capitalized as internally developed software costs was $0.6 million for the year ended December 31, 2021. These amounts were not material for the years ended December 31, 2020 and 2019, respectively. For RSUs granted in September 2021, the Company recorded a cumulative one-time stock-based compensation expense on the date the performance condition was satisfied for the requisite service period satisfied by the employees prior to that date. Upon the date of the performance condition being satisfied on November 9, 2021, the Company recorded cumulative stock-based compensation expense of approximately $2.9 million related to these RSUs. The Company will recognize all remaining stock-based compensation expense over the vesting period using an accelerated graded method. For RSUs granted to members of the Audit Committee, the Company records all stock-based compensation expense on a straight line basis over the requisite service period from the day of grant, which is considered one year for annual grants and three years for initial RSUs granted to members of the Audit Committee. During the year ended December 31, 2021, total stock-based compensation recorded by the Company related to members of the Audit Committee was $0.1 million.

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