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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
Equity Incentive Plans
On March 5, 2021, our Board of Directors adopted our 2021 Equity Incentive Plan (“2021 Plan”). Prior to that date, we had established our 2015 Equity Incentive Plan (“2015 Plan”) and 2005 Equity Incentive Plan (“2005 Plan” and collectively with the 2021 Plan and 2015 Plan, the “Plans”). The 2021 Plan serves as the successor to the 2015 Plan and 2005 Plan and provides for the issuance of incentive and nonqualified stock options, SARs, restricted stock, and restricted stock units (“RSUs”), to employees, directors, consultants, and advisors.
Stock options under the Plans may be granted with contractual terms of up to ten years (or five years if granted to a greater than 10.0% stockholder) and at prices no less than 100.0% of the fair value of the shares on the date of grant; provided, however, that (i) the exercise price of an incentive stock option (“ISO”) and nonqualified stock option (“NSO”) granted to a greater than 10.0% stockholder shall not be less than 110.0% of the fair value of the shares on the date of grant. Awards granted under the Plans generally vest over four years.
Certain stock options have an early exercise feature. Shares purchased pursuant to the early exercise of stock options are subject to repurchase until those shares vest; therefore, cash received in exchange for unvested shares exercised is recorded as a liability on the accompanying consolidated balance sheets, and is reclassified to Class B common stock and additional paid-in capital as the shares vest. There were 35,326 and 120,088 early exercised shares outstanding as of December 31, 2022 and 2021, respectively. As of December 31, 2022, there is a liability for early exercised shares outstanding in the amount of $0.1 million recorded in accrued expenses and other current liabilities in our consolidated balance sheet.
On March 13, 2021, our Board of Directors adopted a non-employee director compensation policy that became effective upon our IPO. The policy provides for annual cash retainers for non-employee directors and an additional cash retainer for those non-employee directors that serve as chairpersons or members of our audit, compensation, nominating and corporate governance, and other committees. Additionally, directors will have the option to receive their annual retainer amounts in cash or equity. Each new non-employee director appointed to the board of directors after the IPO date will be granted an initial RSU award with a value of $0.3 million subject to vesting over a three-year period.
As of December 31, 2022 and 2021, the maximum number of shares authorized for issuance to participants under the Plans was 30,263,529 and 20,615,612, respectively. As of December 31, 2022 and 2021, the number of shares available for issuance to participants under the Plans was 23,358,039 and 18,994,572, respectively.
During the years ended December 31, 2022 and 2021, no SARs were granted to employees. The SARs outstanding as of the time of the IPO were equity-classified and were measured at the grant date fair value. The SARs were vested and settled upon completion of the IPO and 1,642,570 shares of Class B common stock were issued in connection with this event. Compensation expense of $2.8 million was recognized for the year ended December 31, 2021.
Restricted Stock Units
The following summarizes the activity for the unvested RSUs during the year ended December 31, 2022:
SharesWeighted-
Average
Grant Date Fair Value
Unvested at December 31, 20211,082,980 $27.70 
Granted5,188,699 14.77 
Vested(832,940)21.74 
Forfeited and canceled(878,822)19.95 
Unvested at December 31, 20224,559,917 $15.57 
The total fair value of RSUs vested during year ended December 31, 2022 was $7.4 million. Future stock-based compensation for unvested RSUs awarded as of December 31, 2022 was approximately $65.6 million and is expected to be recognized over a weighted-average period of 3.13 years.
Stock Options
The following summarizes our stock option activity for the periods indicated (in thousands, except share and per share amounts):
Number of
options
outstanding		Weighted-
average
exercise
price		Weighted-
average
remaining
contractual
term
(In years)		Aggregate
intrinsic
value
As of December 31, 202136,716,816 $3.55 5.76$633,730 
Granted1,100,118 14.72 
Exercised(6,076,639)1.61 
Forfeited and canceled(1,881,199)7.68 
Vested and expected to vest as of December 31, 202229,859,096 $4.10 4.67$97,523 
Exercisable as of December 31, 202224,464,016 $2.95 4.34$93,897 
The following table summarizes the weighted-average grant date fair value of options granted, intrinsic value of options exercised, and fair value of options vested for the years ended December 31, 2022, 2021, and 2020 (in thousands, except per share amounts):
Year Ended
December 31,
202220212020
Weighted-average grant date fair value of options granted$4.87 $10.17 $3.82 
Intrinsic value of options exercised$66,326 $246,238 $17,814 
Total fair value of options vested$26,668 $43,769 $12,684 
Future stock-based compensation for unvested employee options granted and outstanding as of December 31, 2022 was $38.0 million and is expected to be recognized over a weighted-average period of 1.90 years.
Valuation Assumptions
We estimated the fair value of stock options granted using the Black-Scholes option pricing model with the following weighted-average assumptions:
Year Ended
December 31,
202220212020
Expected term (in years)
5.24 - 6.00
5.48 - 6.07
5.50 - 6.08
Volatility
32% - 36%
52% - 65%
43% - 66%
Risk-free interest rate
1.62% - 2.87%
0.50% - 1.06%
0.37% - 1.63%
Dividend yield0%0%0%
Fair value of underlying common stock
$11.07 - $15.75
$16.78 - $30.02
$4.06 - $9.05
We elected to use the midpoint practical expedient to calculate the expected term.
2021 Employee Stock Purchase Plan
On March 5, 2021, our Board of Directors and stockholders adopted our employee stock purchase plan (“ESPP”). The ESPP became effective immediately prior to the IPO. The ESPP authorized the issuance of 3,900,000 shares of our Class A common stock pursuant to purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our Class A common stock reserved for issuance automatically increase on January 1 of each calendar year through January 1, 2031, by the lesser of (1) 1.0% of the total number of shares of our Class A common stock outstanding on December 31 of the preceding calendar year, or (2) 11,700,000 Class A common shares; provided, that prior to the date of any such increase, our Board of Directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). Employees may contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of our Class A common stock under the ESPP. Our Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per Class A common share equal to the lower of (a) 85% of the fair market value of our Class A common stock on the first trading date of an offering or (b) 85% of the fair market value of our Class A common stock on the date of purchase. The current offering period began in December 2022 and ends in June 2023. For the years ended December 31, 2022 and 2021, we recorded approximately $1.5 million and $1.3 million of compensation expense associated with our ESPP, respectively.
Equity Awards Granted in Acquisition
In connection with the acquisition of Wisely, we issued stock options that were granted to Wisely employees and were fully vested and outstanding on the acquisition date under the Wisely 2019 Plan. The stock options will be settled in shares of our Class A common stock and will retain the terms and conditions under which they were originally granted. No additional equity awards will be granted under the Wisely 2019 Plan.
Stock-Based Compensation Expense
The classification of stock-based compensation expense, which includes expense for stock options, RSUs, SARs, and ESPP charges, by line item within the consolidated statements of operations is as follows (in thousands):
Year Ended
December 31,
202220212020
Cost of revenue - platform$5,457 $2,705 $556 
Cost of revenue - professional services and other630 474 124 
Research and development14,053 11,283 1,497 
General and administrative20,339 16,137 2,827 
Sales and marketing5,545 2,128 376 
Total stock-based compensation expense$46,024 $32,727 $5,380