Employee Benefit Plans | 7. Employee Benefit Plans Equity Incentive Plans The Company sponsors the 2018 Equity Incentive Plan (the “2018 Plan”), which was approved by stockholders on September 5, 2018. The purpose of the 2018 Plan is to promote the long-term growth and profitability of the Company by (i) providing employees with incentives to improve stockholder value and to contribute to the growth and financial success of the Company through their future services, and (ii) enabling the Company to attract, retain and reward the best‑available persons. The options granted under the 2018 Plan, may be granted at a price not less than the fair market value on the grant date. The Board, or a committee of the Board, has granted options with an exercise price at or which approximates the fair value on the grant date. Grants of time-based awards generally vest over a four-year three-year The 2018 Plan provides for annual increases in the number of shares available for issuance on the first day of each year equal to the lesser of (i) 12,500,000 shares, (ii) 5% of the outstanding shares on the last date of the preceding year, and (iii) a lower amount determined by the plan administrator. As of June 30, 2020, 15,004,326 shares of common stock remain available for grant under the 2018 Plan. The following is a summary of restricted stock units for the current year period: Restricted Stock Units Number of Shares Weighted Average Grant-Date Fair Value Weighted Average Remaining Contractual Term (in years) Unvested at December 31, 2019 6,975,994 $ 14.72 2.2 Granted 3,999,194 $ 18.21 Vested (1,995,721 ) $ 14.32 Forfeited/cancelled (438,509 ) $ 15.58 Unvested at June 30, 2020 8,540,958 $ 16.40 2.4 The following is a summary of stock option activity for the current year period: Stock Options Number of Shares Weighted Average Exercise Price Aggregate Intrinsic Value (in thousands) Weighted Average Remaining Contractual Term (in years) Outstanding at December 31, 2019 15,812,928 $ 14.67 $ 50,994 7.4 Granted 2,312,230 $ 21.15 Exercised (1,920,482 ) $ 13.34 Forfeited (112,088 ) $ 13.43 Expired (23,376 ) $ 14.73 Outstanding, vested and expected to vest at June 30, 2020 16,069,212 $ 15.77 $ 124,927 7.4 Vested and exercisable at June 30, 2020 9,760,821 $ 15.15 $ 81,850 6.4 The following is a summary of restricted stock awards for the current year period: Restricted Stock Awards Number of Shares Weighted Average Grant-Date Fair Value Weighted Average Remaining Contractual Term (in years) Unvested at December 31, 2019 299,798 $ 18.30 2.3 Vested (99,933 ) Unvested at June 30, 2020 199,865 $ 18.30 1.8 Fair Value of Stock Options The Company used the Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted using the following weighted-average assumptions: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Expected life (in years) 6.2 6.0 5.8 5.9 Risk-free interest rate 0.5% 2.2% 1.4% 2.5% Volatility 52% 46% 48% 46% Dividend yield —% —% —% —% Fair value of common stock $19.24 $16.48 $21.15 $12.73 2018 Employee Stock Purchase Plan, As Amended The Company sponsors the 2018 Employee Stock Purchase Plan, as amended (the “ESPP”), which was first approved by stockholders on September 5, 2018. The ESPP provides for annual increases in the number of shares available for issuance on the first day of each year equal to the lesser of (i) 5,346,888 shares, (ii) 1% of the outstanding shares on the last date of the preceding year, and (iii) a lower amount determined by the plan administrator. E xcept for the initial offering period, the ESPP provides for 24-month offering periods beginning May 22 and November 22 of each year, and each offering period will consist of four six-month purchase periods. The initial offering period began on September 25 , 2018 and will end on November 22, 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 common stock on the offering date , or (2) the fair market value of its common stock on the purchase date . During the three and six months ended June 30, 2020, the Company’s employees purchased shares of its common stock under the ESPP at a weighted average purchase price of $ with proceeds of $ million. During the three and six months ended June 30, 2019, the Company’s employees purchased 260,991 shares of its common stock under the ESPP with a weighted average purchase price of $ 10.20 with proceeds of $ 2.7 million. As of June 30, 2020, 4,518,860 shares of common stock remain available for issuance under the ESPP. The Company used Black-Scholes-Merton option pricing model to estimate the fair value of ESPP purchase rights granted using the following weighted-average assumptions: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Expected life (in years) 1.3 1.2 1.3 1.2 Risk-free interest rate 0.2% 2.3% 0.2% 2.3% Volatility 58% 43% 58% 43% Dividend yield —% —% —% —% Fair value of common stock $19.81 $16.98 $19.81 $16.98 Stock-Based Compensation Expense Stock-based compensation expense recognized in the condensed consolidated financial statements is as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2020 2019 2020 2019 Cost of revenue $ 1,047 $ 991 $ 2,007 $ 2,087 Research and development 7,496 5,629 13,953 10,395 Sales and marketing 4,841 3,016 9,184 5,796 General and administrative 6,087 5,518 11,829 11,987 Stock-based compensation expense, net of amounts capitalized 19,471 15,154 36,973 30,265 Capitalized stock-based compensation expense 710 1,078 1,486 2,031 Stock-based compensation expense $ 20,181 $ 16,232 $ 38,459 $ 32,296 As of June 30, 2020, unamortized stock-based compensation was as follows: Unrecognized stock-based compensation (in thousands) Weighted average vesting period (in years) Restricted stock units (service-based) $ 116,445 2.7 Restricted stock units (performance-based) (1) 2,672 1.0 Stock options 44,198 2.4 Restricted stock awards 3,204 1.8 ESPP 3,667 1.3 Total unrecognized stock-based compensation $ 170,186 (1) Unrecognized stock-based compensation expense pertains to performance-based restricted stock units (“Performance RSUs”) that were granted between second quarter of 2015 through the date of the Company’s initial public offering (“IPO”). Such performance RSUs vest upon the satisfaction of both a service condition and a Performance Vesting Condition, both of which must be met in order for the awards to vest and issue. The Performance Vesting Condition was met upon the occurrence of the Company’s IPO. The remaining unamortized stock-based compensation is recognized on an accelerated basis over the remaining weighted-average requisite service period as employee services are provided. 401(k) Plan In the United States, the Company offers its employees a defined contribution plan that qualifies as a deferred salary arrangement under Section 401 of the U.S. Internal Revenue Code (“401(k) Plan”). Under the 401(k) Plan, participating employees may defer a portion of their pretax earnings not to exceed the maximum amount allowed by the Internal Revenue Service. The Company currently provides a matching contribution of 25% of deferrals for eligible employees. Compensation expense for the Company's matching contributions was $1.0 million and $2.2 million during the three and six months ended June 30, 2020, respectively, and $0.6 million and $1.6 million during the three and six months ended June 30, 2019, respectively. |