Stockholders’ Notes Receivable and Redeemable Common Stock

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Stockholders’ Notes Receivable, Redeemable Common Stock and Stock Option Plans

Stockholders’ Notes Receivable and Redeemable Common Stock

In August 2018, the Company loaned its Chief Executive Officer and Chief Growth Officer a total of $4.0 million under secured nonrecourse promissory notes (the “Notes”). The Notes bear interest at a rate of 2.42% per annum compounded annually and mature on August 30, 2021, with interest and principal due at maturity. The Notes are secured by pledges of 1.6 million shares of outstanding common stock of the Company owned by the two officers (the “Pledged Shares”). The Notes may be prepaid in cash at any time without penalty. At maturity and in certain events of default, the Notes may, at the option of the two officers, be repaid in cash or surrender and cancellation of the Pledged Shares at fair market value. If the Pledged Shares are insufficient to repay the entire amount due under the Notes, then the value of the Pledged Shares will be deemed to be the full amount due under the Notes.

As the Company’s only recourse on the Notes and associated interest is the Pledged Shares then the Notes were accounted for as nonrecourse and recorded to stockholders’ equity as of March 31, 2020. This was accounted for as though the Company repurchased the Pledged Shares and in exchange issued the Notes and granted 1.6 million fully

vested stock options with an exercise price equal to the face value of Notes plus interest. No principal or interest payments were paid during the three months ended March 31, 2020. During the quarter ended September 30, 2020, all principal and interest due under the notes were prepaid.

In connection with the Notes, the Company provided the officers with a right to sell to the Company outstanding shares of common stock upon settlement of the Notes (the “Put Option”). The officers may only exercise the Put Option upon repayment of the Notes using the Pledged Shares or upon the prepayment of the Notes using proceeds from the officers’ sale or disposal of the Pledged Shares at a price less than the face value of the Notes. The Put Option allows the officers to require the Company to repurchase any or all common stock held or beneficially owned to offset their tax liabilities resulting from the settlement of the Notes via one of the above methods. As the exercisability of the Put Option and therefore redemption of the common stock is outside the control of the Company then all common stock held or beneficially owned by the officers requires temporary equity classification. The Company therefore classified $19.0 million of common stock outside of stockholders’ equity as of March 31, 2020, which represented the fair value of the shares held or beneficially owned on the transaction date. The Company did not adjust the carrying value of the redeemable common stock during the three months ended March 31, 2020 since a redemption event was not probable. The Put Option expired unexercised upon the repayment of the Notes and during the Company’s quarter ended September 30, 2020, the $19.0 million of redeemable common stock has been reclassified back to common stock.

Stockholders’ Equity and Stock Option Plans

Common Stock

In connection with the IPO in December 2020, the Company’s restated certificate of incorporation became effective, which authorized 1,000,000,000 shares of Class A common stock, $0.0001 par value per share, and 1,000,000,000 shares of Class B common stock, $0.0001 par value per share. Class A and Class B common stock are referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise noted.

Equity Incentive Plans

Upon completion of the IPO, the Company adopted the 2020 Equity Incentive Plan (“2020 Plan”), pursuant to which the Company may grant stock options, restricted stock awards, stock appreciation rights, restricted stock units (“RSUs”), deferred share units (“DSUs”) performance awards, and stock bonus awards. As of March 31, 2021, the Company has reserved 7,546,410 shares of Class A common stock for the issuance of awards under the 2020 Plan. These available shares will increase automatically on January 1 for each of the first ten calendar years during the term of the 2020 Plan by the number of shares equal to the lesser of five percent (5%) of the aggregate number of outstanding shares of all classes of the Company’s common stock outstanding as of the immediately preceding December 31, or a number as may be determined by the Company’s board of directors or compensation committee. To the extent outstanding awards under the 2017 Plan and the 2006 Plan are forfeited, lapse unexercised, or would otherwise have been returned to the share reserve under the Prior Plans, the shares of Class B common stock subject to such awards instead will be available for future issuance as Class A common stock under the 2020 Plan. No new awards were issued under the 2006 Plan or 2017 Plan after the effective date of the 2020 Plan.

Stock Options

A summary of stock option activity under the Company’s equity incentive plan and related information is as follows:

	Stock Options
	Number of Shares Underlying Outstanding Options	Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding — December 31, 2020	8,459,969	$	2.53	6.83	$	215,144
Options granted	657,066	$	36.65
Options exercised	(278,412)	$	1.62
Options canceled	(6,343)	$	4.29
Options expired	(160)	$	0.26
Outstanding — March 31, 2021	8,832,120	$	5.09	6.97	$	390,601
Vested — March 31, 2021	5,551,331	$	2.33	5.75	$	260,855

As of March 31, 2021, unrecognized stock-based compensation of $22.7 million related to unvested stock options will be recognized on a straight-line basis over a weighted average period of 3.35 years.

Restricted Stock Units

A summary of RSU activity under the Company’s equity incentive plan and related information is as follows:

	RSUs
	Number of Shares	Weighted-Average Grant Date Fair Value per Share
Unvested — December 31, 2020	—	$	—
Granted	227,792	$	39.47
Unvested — March 31, 2021	227,792	$	39.47

As of March 31, 2021, unrecognized stock-based compensation of $8.4 million related to unvested RSUs will be recognized on a straight-line basis over a weighted average period of 3.48 years.

2020 Employee Stock Purchase Plan

In November 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Employee Stock Purchase Plan (“ESPP”), which became effective in connection with the IPO. A total of 500,000 shares of the Company’s Class A common stock were initially reserved for issuance under the ESPP.

The aggregate number of shares reserved for sale under the ESPP will increase automatically on January 1st of each of the first ten calendar years during the term of the ESPP after the first offering date by the number of shares equal to the lesser of 1% of the total outstanding shares of all classes of the Company’s common stock as of the immediately preceding December 31, (rounded down to the nearest whole share) provided that the Company’s board of directors or the compensation committee may, in its sole discretion, reduce the amount of the increase in any particular year. The aggregate number of shares issued over the term of the ESPP, subject to stock dividends, recapitalizations, stock splits, reverse stock splits, subdivisions, combinations, reclassifications or similar changes to the Company’s capital structure, may not exceed 7,500,000 shares of Class A common stock. As of March 31, 2021, the Company has reserved 989,881 shares of its common stock for issuance under the ESPP.

Under the current ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP on each Purchase Date at a price per share equal to eighty-five percent (85%) of the lesser of: (a) the Fair Market Value on the Offering Date or (b) the Fair Market Value on the Purchase Date. No employee may purchase shares under the ESPP at a rate in excess of $25,000 in Fair Market Value for each calendar year in which

such Offering Period is in effect or 3,500 shares. The 2020 ESPP provides for, at maximum, 27 months offering periods with each offering period may itself consist of one or more six (6)-month purchase periods, generally in May and November each year, beginning December 9, 2020 through May 31, 2022 with Purchase Date on the last day of each Purchase Period. As of March 31, 2021, $1.9 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions and is included in accrued and other current liabilities. There were no purchases for the three months ended March 31, 2021 related to the 2020 ESPP.

As of March 31, 2021, unrecognized stock-based compensation expense related to the ESPP was $4.4 million, which is expected to be recognized over a weighted-average period of 1.17 years.

Stock-Based Compensation

The total stock-based compensation recognized in the condensed consolidated statements of operations and comprehensive income is as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Cost of revenue	$	168	$	10
Technology and development	481		74
Sales and marketing	1,161		180
General and administrative	1,355		231
Total stock-based compensation	3,165		495
Tax benefit from stock-based compensation	(251)		(43)
Total stock-based compensation, net of tax effect	$	2,914	$	452