Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Equity Offering

In February 2021, we entered into an underwriting agreement pursuant to which we agreed to issue and sell 10,974,600 shares of our common stock at a public offering price of $102.00 per share generating aggregate net proceeds of $1,091.5 million, after deducting underwriting discounts and commissions of $26.9 million and offering expenses of $1.1 million.

Securities Repurchase Program

In November 2021, our board of directors approved a $500.0 million increase to our existing securities repurchase program authorizing the repurchase of up to $1.0 billion of our common stock and/or convertible notes, through open market purchases, block trades, and/or privately negotiated transactions or pursuant to Rule 10b5-1 plans, in compliance with applicable securities laws and other legal requirements. The timing, volume, and nature of the repurchases will be determined by management based on the capital needs of the business, market conditions, applicable legal requirements, and other factors. During the nine months ended September 30, 2021, we repurchased $100.0 million of aggregate principal amount of the 2025 notes in privately-negotiated transactions for an aggregate consideration of $184.9 million. $665.5 million remains under the repurchase program, which has no expiration date and will continue until otherwise suspended, terminated or modified at any time for any reason by our board of directors.

Share-based Compensation Expense

Total share-based compensation expense recorded for employees and non-employees is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenues	$	393	$	262	$	1,174	$	644
Research and development	8,917		8,433		25,976		23,044
Sales and marketing	3,051		2,431		9,625		7,053
General and administrative	12,151		10,403		39,382		28,668
Total share-based compensation expense	$	24,512	$	21,529	$	76,157	$	59,409

During the three and nine months ended September 30, 2021, we capitalized share-based compensation expense of $0.6 million and $1.8 million, respectively.

2021 PSU Grants with Market-Based Conditions

In March 2021, we granted PSUs under the 2013 Equity Incentive Plan (the 2013 Plan) with market-based conditions to certain of our key employees. The number of shares of our common stock that may be issued to settle these PSUs range from 50% at the threshold level to 150% at the maximum level of the 100% target level of the award depending on achieving a maximum average market value of the per share price of our common stock, for a period of 60 consecutive trading days, over a three-year performance period ending on the third anniversary of the date of grant. No payout will be made for performance below the 50% threshold level. The market value of the per share price of our common stock must reach $123.81, $148.58, or $173.34 at the threshold, target, or maximum levels, respectively, for achievement of the award, which could result in issuance of 244,086, 488,173, or 732,260 shares of our common stock at each respective payout level. These PSUs will vest over a four-year period, with the initial vesting of 50% of the award occurring in March 2024. The number of PSUs granted totaled 732,260 shares, which represents the maximum number of shares, and had a grant date fair value of $68.55 per share, determined under the Monte Carlo simulation approach described further below. As of September 30, 2021, the market-based conditions have not been met.

Fair Value of PSUs with Market-Based Conditions

PSUs with market-based conditions are converted into shares of our common stock upon vesting on a one-for-one basis. Vesting is subject to the achievement of certain per share price of our common stock targets and the employee's continuing service to us. If the targets are achieved, the awards vest over a four-year period. We estimate the fair value of the PSUs using a Monte Carlo simulation approach, which utilizes the fair value of our common stock based on an active market and requires input on the following subjective assumptions:

Expected Term. The expected term for the awards is the performance period of three years.

Expected Volatility. The expected volatility is based on the historical average volatility of our stock price over the expected term.

Expected Dividends. The dividend assumption is based on our historical experience. To date we have not paid any dividends on our common stock.

Risk-Free Interest Rate. The risk-free interest rate used in the valuation method is the implied yield currently available on the U.S. treasury zero-coupon issues, with a remaining term equal to the expected term.

The following table summarizes the key assumptions used to determine the fair value of the awards:


Expected term (years)	3.00
Expected volatility	49.04	%
Expected dividends	—	%
Risk-free interest rate	0.27	%

2021 PSU Grants with Financial and Strategic Performance Targets

In March 2021, we granted PSUs under the 2013 Plan to certain of our key executives. These PSUs entitle the executives to receive a certain number of shares of our common stock based on our satisfaction of certain financial and strategic performance targets during 2021. These PSUs will vest over a three-year period, with the initial vesting occurring in March 2022. The number of shares underlying these March 2021 PSUs granted totaled 278,644 shares and had a grant date fair value of $99.05 per share. As of September 30, 2021, the performance-based milestones are expected to be partially achieved during 2021.

PSUs with Financial and Strategic Performance Targets and RSUs

PSUs with financial and strategic performance targets and RSUs are converted into shares of our common stock upon vesting on a one-for-one basis. Vesting of PSUs is subject to our achievement of specified financial and strategic performance targets in addition to the employee's continuing service to us while vesting of RSUs is subject to the employee’s continuing service to us. PSUs typically vest over three years while RSUs typically vest over three or four years. We assess the achievement of financial and strategic performance targets on a quarterly basis and adjust our share-based compensation expense as appropriate.

RSU and PSU Activity

Activity for RSUs and PSUs is as follows:


	RSUs and PSUs Outstanding
	Shares Outstanding	Weighted Average Grant Date Fair Value
Balance at December 31, 2020	4,816,000	$	37.82
Granted	2,216,327	86.60
Released	(2,391,951)	33.81
Forfeited	(430,325)	44.84
Balance at September 30, 2021	4,210,051	$	65.06

As of September 30, 2021, our total unrecognized share-based compensation expense related to RSUs and PSUs was approximately $170.2 million, which will be recognized over the remaining weighted-average vesting period of approximately 2.1 years.