Stockholders' Equity | 11. Stockholders’ Equity Class A and Class B Common Stock The Company has two classes of common stock, Class A and Class B. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Shares of Class B common stock may be converted into Class A common stock at any time at the option of the stockholder, and are automatically converted upon the sale or transfer to Class A common stock, subject to certain limited exceptions. During the three and six months ended June 30, 2020, 30,092,969 shares and 117,610,911 shares of Class B common stock were converted into Class A common stock, respectively. As of June 30, 2020, the Company had authorized 2,000,000,000 shares of Class A common stock and 310,000,000 shares of Class B common stock, each at a par value per share of $0.00001, of which 187,108,585 shares of Class A common stock and 115,145,948 shares of Class B common stock were issued and outstanding. Equity Incentive Plans The Company has two equity incentive plans, the 2012 equity incentive plan (the “2012 Plan”) and the 2019 equity incentive plan (the “2019 Plan”). In connection with the IPO, the Company ceased granting awards under the 2012 Plan, and all shares that remained available for issuance under the 2012 Plan at that time were transferred to the 2019 Plan. Stock Options The following table summarizes the Company’s stock option activity and weighted average exercise prices: Number Of Options Outstanding Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value (in thousands) Balance outstanding—December 31, 2019 36,384,767 $ 2.96 7.6 $ 1,266,938 Options granted 14,600 41.19 Options exercised (5,422,829 ) 1.40 Options forfeited or expired (335,713 ) 5.44 Balance outstanding—June 30, 2020 30,640,825 $ 3.23 7.1 $ 2,565,249 As of June 30, 2020, there were 35,300 shares of Class A common stock and 30,605,525 shares of Class B common stock issuable upon the exercise of options outstanding. As of December 31, 2019, there were 20,700 shares of Class A common stock and 36,364,067 shares of Class B common stock issuable upon the exercise of options outstanding. Total compensation cost related to unvested awards not yet recognized was approximately $75.2 million and $90.5 million as of June 30, 2020 and December 31, 2019, respectively. The weighted average period over which this compensation cost related to unvested employee awards will be recognized is 2.3 years and 2.7 years as of June 30, 2020 and December 31, 2019, respectively. The weighted average grant-date fair value of options granted during the six months ended June 30, 2020 and 2019 was $16.55 and $4.03, respectively. The Company received approximately $7.2 million and $5.2 million in cash proceeds from options exercised during the six months ended June 30, 2020 and 2019, respectively. The intrinsic value of options exercised during the six months ended June 30, 2020 and 2019 was approximately $268.6 million and $53.8 million, respectively. The aggregate fair value of options vested during the six months ended June 30, 2020 and 2019 was $8.5 million and $3.6 million, respectively. Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability. The shares issued upon the early exercise of these unvested stock option awards, which are reflected as exercises in the table above, are considered to be legally issued and outstanding on the date of exercise. Upon termination of service, the Company may repurchase unvested shares acquired through early exercise of stock options at a price equal to the price per share paid upon the exercise of such options. The Company has recorded liabilities related to early exercises of 839,250 shares of common stock and 1,239,750 shares of common stock as of June 30, 2020 and December 31, 2019, respectively. Restricted Stock Units The following table summarizes the activity for the Company’s unvested RSUs: Shares Weighted- Average Fair Value Balance—December 31, 2019 647,094 $ 36.08 Awarded 3,362,940 46.32 Vested (3,658 ) 32.81 Forfeited/canceled (50,793 ) 37.99 Unvested and outstanding—June 30, 2020 3,955,583 $ 44.77 In June 2020, the Company granted 96,210 restricted shares of Class A common stock, which are subject to service-based vesting conditions over approximately four years. Total compensation cost related to unvested RSUs and restricted shares of common stock not yet recognized was approximately $179.2 million and $30.4 million as of June 30, 2020 and December 31, 2019, respectively. The weighted average period over which this compensation cost related to unvested RSUs and restricted shares will be recognized is 3.7 years and 3.9 years as of June 30, 2020 and December 31, 2019, respectively. Employee Stock Purchase Plan In September 2019, the Board adopted and approved the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective on the date of the final prospectus for the Company’s IPO (the “Final Prospectus”). As of June 30, 2020, 9,354,222 shares of Class A common stock remain available for grant under the ESPP. The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of our Class A common stock on specified dates during such offerings. Under the ESPP, we may specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. The initial offering period began on the date of the Final Prospectus and ended on May 15, 2020. The next offering period began on May 18, 2020 and will end on November 13, 2020. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s Class A common stock on the first trading day of the offering period, which for the initial offering period was the $27.00 initial public offering price of the Company’s Class A common stock, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP. The Company recognized $1.1 million and $2.1 million of stock-based compensation expense related to the ESPP during the three and six months ended June 30, 2020, respectively As of June 30, 2020, $2.1 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions. During the three months ended June 30, 2020, the Company issued 320,104 shares of Class A common stock under the ESPP. Stock-Based Compensation The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options on the date of grant. The Company recognizes and measures compensation expense for all stock-based payment awards granted to employees, directors, and nonemployees based on the fair value of the awards on the date of grant. The determination of the grant date fair value using an option-pricing model is affected by the estimated fair value of the Company’s common stock as well as assumptions regarding a number of other complex and subjective variables. These variables include expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The fair value of RSUs is determined by the closing price on the date of grant of the Company’s Class A common stock, as reported on The Nasdaq Global Select Market. The Company estimates the fair value of the rights to acquire stock under the ESPP using the Black-Scholes option pricing model. Stock-based compensation is recognized on a straight-line basis over the requisite service period and account for forfeitures as they occur. Stock-based compensation expense was included in the condensed consolidated statement of operations as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Cost of revenue $ 407 $ 112 $ 638 $ 211 Research and development 8,703 989 14,550 1,775 Sales and marketing 4,541 1,007 7,615 1,736 General and administrative 3,183 786 6,091 1,617 Stock-based compensation, net of amounts capitalized 16,834 2,894 28,894 5,339 Capitalized stock-based compensation expense 198 71 301 123 Total stock-based compensation expense $ 17,032 $ 2,965 $ 29,195 $ 5,462 |