Employee Benefit Plans | 9. 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 fair value on the grant date. Grants of time-based awards generally vest over a four-year three-year As of June 30, 2021, 17,129,162 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, 2020 7,000,855 $ 17.72 1.1 Granted 3,279,068 $ 25.56 Vested (1,993,215 ) $ 17.83 Forfeited/cancelled (981,563 ) $ 19.84 Unvested at June 30, 2021 7,305,145 $ 20.93 1.2 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, 2020 15,100,142 $ 16.07 $ 143,156 6.9 Granted 2,636,878 $ 21.77 Exercised (1,229,180 ) $ 14.45 Forfeited (774,324 ) $ 19.35 Expired (81,383 ) $ 19.49 Outstanding, vested and expected to vest at June 30, 2021 15,652,133 $ 16.98 $ 67,395 6.8 Vested and exercisable at June 30, 2021 10,668,302 $ 15.68 $ 58,283 5.9 On February 16, 2021, the Company granted 580,911 options to purchase shares of the Company’s common stock to its Chief Executive Officer at an exercise price of $21.99 per share (the “Executive Option Grant”). The stock options contain a service condition and a market condition of achieving a per share price milestone. The grant-date fair value of the award is $5.7 million, which will be recognized using the accelerated attribution method. Stock-based compensation is recognized for each vesting tranche using service periods that range from 9 months to 3 years. The grant-date fair value was determined using the Monte Carlo valuation, which incorporates various assumptions including expected stock price volatility, contractual term, dividend yield, and stock price at grant date. During the three and six months ended June 30, 2021, the Company recognized $1.1 million and $1.6 million of stock-based compensation expense, respectively, related to this award, which is included in general and administrative expense in the condensed consolidated statement of operations. 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, 2020 102,460 $ 18.30 1.2 Granted 274,417 $ 26.89 Vested (51,619 ) $ 21.21 Forfeited/cancelled (64,823 ) $ 26.89 Unvested at June 30, 2021 260,435 $ 24.64 2.1 Fair Value of Stock Options Except for the Executive Option Grant discussed above, 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, 2021 2020 2021 2020 Expected life (in years) 6.2 6.2 5.8 5.8 Risk-free interest rate 1.2% 0.5% 0.8% 1.4% Volatility 51% 52% 51% 48% Dividend yield —% —% —% —% Fair value of common stock $18.39 $19.24 $21.70 $21.15 2018 Employee Stock Purchase Plan, As Amended The Company sponsors the 2018 Employee Stock Purchase Plan, as amended (the “ESPP”), which was approved by stockholders on September 5, 2018. 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 Under the reset provision, if the closing stock price on the purchase date falls below the closing stock price on the offering date of an ongoing offering period, the ongoing offering terminates immediately following the purchase of ESPP shares on the purchase date and participants in the terminated offering are automatically enrolled in the new offering period (“ESPP reset”), resulting in a modification charge to be recognized over the new offering period. During the three and six months ended June 30, 2021, there was an ESPP reset that resulted in a modification charge of $2.0 million, which is being recognized over the new offering period ending in May 2023. During the three and six months ended June 30, 2021, the Company’s employees purchased 245,914 shares of its common stock under the ESPP with a weighted average purchase price of $15.75, with aggregate proceeds to the Company of $3.9 million. During the three and six months ended June 30, 2020, the Company’s employees purchased 267,757 shares of its common stock under the ESPP with a weighted average purchase price of $11.51, with aggregate proceeds to the Company of $3.1 million. As of June 30, 2021, 5,416,004 shares of common stock remain available for issuance under the ESPP. The Company used the 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, 2021 2020 2021 2020 Expected life (in years) 1.3 1.3 1.3 1.3 Risk-free interest rate 0.1% 0.2% 0.1% 0.2% Volatility 53% 58% 53% 58% Dividend yield —% —% —% —% Fair value of common stock $19.12 $19.81 $19.12 $19.81 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) 2021 2020 2021 2020 Cost of revenue $ 1,580 $ 1,047 $ 3,062 $ 2,007 Research and development 10,313 7,496 19,810 13,953 Sales and marketing 6,414 4,841 12,192 9,184 General and administrative 7,266 6,087 14,108 11,829 Stock-based compensation expense, net of amounts capitalized 25,573 19,471 49,172 36,973 Capitalized stock-based compensation expense 577 710 1,136 1,486 Stock-based compensation expense $ 26,150 $ 20,181 $ 50,308 $ 38,459 As of June 30, 2021, unamortized stock-based compensation was as follows: Unrecognized stock-based compensation (in thousands) Weighted average vesting period (in years) Restricted stock units $ 140,150 2.4 Stock options 41,763 2.3 Restricted stock awards 5,872 2.3 ESPP 7,127 1.9 Total unrecognized stock-based compensation $ 194,912 401(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 $1.2 million and $2.6 million during the three months and six months ended June 30, 2021, respectively, and $1.0 million and $2.2 million during the three and six months ended June 30, 2020, respectively. |