The Company’s 2016 Equity Incentive Plan (the “2016 Plan”) became effective on September 15, 2016. The 2016 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and performance share awards to employees, directors and consultants of the Company. The number of shares of common stock reserved for issuance under the 2016 Plan will automatically increase on January 1 of each year by 3% of the number of shares of the Company’s capital stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors.

The Company’s Employee Stock Purchase Plan (the “2016 ESPP”) became effective on September 15, 2016. The number of shares reserved for issuance under the 2016 ESPP will automatically increase on January 1 of each year by the lesser of 200,000 shares of the Company’s common stock, 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors.

The 2016 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount of up to 15% through payroll deductions of their eligible compensation, subject to any plan limitations. The 2016 ESPP provides for separate six-month offering periods beginning each March and September of each fiscal year.

On each purchase date, eligible employees will purchase the Company’s stock at a price per share equal to 85% of the lesser of (i) the fair market value of the Company’s common stock on the offering date or (ii) the fair market value of the Company’s common stock on the purchase date.

For the six months ended June 30, 2022 and 2021, 58,747 and 23,499 shares of common stock were purchased under the 2016 ESPP, respectively. The Company recorded stock-based compensation expense of $0.4 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively. The Company recorded stock-based compensation expense of $0.8 million and $0.9 million for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, unrecognized compensation cost related to the 2016 ESPP was $0.3 million which will be amortized over a weighted-average period of 0.17 years.

The fair value of shares issuable under the 2016 ESPP is determined using the Black-Scholes option pricing model with the following weighted average assumptions:


	Six Months Ended June 30,
	2022	2021
Employee Stock Purchase Plan:
Expected term (in years) (1)	0.50	0.50
Expected volatility (2)	65%	60%
Risk-free interest rate (3)	0.86%	0.06%
Dividend rate (4)	0%	0%

Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant based on the closing market price of its common stock as reported on The Nasdaq Global Market. The option awards generally vest over four years and are exercisable any time after vesting. The stock options expire ten years after the date of grant.

There were no stock options granted during the six months ended June 30, 2022. There was no stock-based compensation expense recorded during the three months ended June 30, 2022 as stock options were fully vested. The Company recorded stock-based compensation expense of $0.4 million for the three months ended June 30, 2021 attributed to stock options. The Company recorded stock-based compensation expense of $0.1 million and $0.8 million for the six months ended June 30, 2022 and 2021, respectively, attributed to stock options.

The total intrinsic value of options exercised for the six months ended June 30, 2022 and 2021 was less than $0.1 million and $8.6 million, respectively. This intrinsic value represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option. Based on the fair market value of the Company’s common stock at June 30, 2022 and 2021, the total intrinsic value of all outstanding options was $1.1 million and $22.2 million, respectively.

There was no unrecognized compensation cost related to nonvested stock options as of June 30, 2022. The amount of cash received from the exercise of stock options during the six months ended June 30, 2022 and 2021 was less than $0.1 million and $2.2 million, respectively.

The following table summarizes the Company’s stock option activity:


	Stock options outstanding			Weighted average exercise price
Outstanding at December 31, 2021		157,740		$	23.83
Exercised		(4,011	)		20.63
Forfeited		(177	)		31.13
Outstanding at June 30, 2022		153,552			23.91

Stock options outstanding, vested and expected to vest and exercisable are as follows:


	As of June 30, 2022
	Number of shares		Remaining contractual life (years)		Weighted- average exercise price
Outstanding		153,552		4.61	$	23.91
Vested and expected to vest		153,552		4.61		23.91
Exercisable		153,552		4.61		23.91

Vested and nonvested stock option activity was as follows:


	Vested
	Options outstanding		Weighted average exercise price
Outstanding at June 30, 2022		153,552	$	23.91

During the six months ended June 30, 2022, the Company granted 2,265,258 restricted stock units (“RSUs”) to members of its senior management and certain other employees pursuant to the 2016 Plan. There were 213,726 RSUs that vested during the six months ended June 30, 2022. The Company accounts for RSUs issued to employees at fair value, based on the market price of the Company’s common stock on the date of grant. The weighted-average grant date fair values of RSUs granted during the six months ended June 30, 2022 and 2021 were $42.41 and $121.67, respectively. The fair values of RSUs that vested during the six months ended June 30, 2022 and 2021, were $17.3 million and $6.8 million, respectively. During the three months ended June 30, 2022 and 2021, the Company recorded $11.9 million and $7.4 million, respectively, of stock-based compensation related to the RSUs. During the six months ended June 30, 2022 and 2021, the Company recorded $18.9 million and $13.3 million, respectively, of stock-based compensation related to the RSUs.

As of June 30, 2022, there was $108.6 million of unrecognized compensation expense related to unvested RSUs which is expected to be recognized over a weighted-average period of approximately 2.50 years. For RSUs subject to graded vesting, the Company recognizes compensation cost on a straight-line basis over the service period for the entire award.

On February 9, 2022, the Compensation Committee of the Company’s Board of Directors approved a modification to the performance thresholds of the Company’s performance-based restricted stock unit (“PSU”) awards which affected 785 grantees and excluded our Named Executive Officers for 2021. The modified PSUs vest based on the Company achieving certain revenue growth thresholds which range from 1% to 40% compounded annual growth over the measurement period. For the portion of the PSUs where the expectation of the achievement of performance conditions changed from improbable prior to the modification to probable post-modification, the Company accounted for this change as a Type III modification under ASC 718, Compensation—Stock Compensation. The modification date fair value for the PSUs was $55.31. As of the modification date, total incremental stock-based compensation expense was $17.5 million which will be recognized over the remaining service periods of the PSU less subsequent forfeitures.

During the six months ended June 30, 2022, the Company granted 447,564 PSUs to members of its management pursuant to the 2016 Plan. There were 74,599 PSUs that vested during the six months ended June 30, 2022. The PSUs, other than those modified on February 9, 2022 as described above, generally vest based on the Company achieving certain revenue growth thresholds which ranged from 20% to 40% compounded annual growth for grants through 2020 and 15% to 35% compounded annual growth for grants starting in 2021 over a measurement period of two years for the first 50% of PSUs and three years for the remaining PSUs. The vesting of the PSUs is subject to the employee’s continued employment with the Company through the date of achievement. During the six months ended June 30, 2022, the share price of the Company’s common stock on the date of issuance of the PSUs ranged from $36.59 to $55.31 per share. The fair value is based on the value of the Company’s common stock at the date of issuance and the probability of achieving the performance metric. Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions. The weighted-average grant date fair values of PSUs granted during the six months ended June 30, 2022 and 2021 were $39.76 and $121.80, respectively.

During the three months ended June 30, 2022 and 2021, the Company recognized $3.6 million and $7.3 million, respectively, of stock compensation expense in connection with the PSU awards. During the six months ended June 30, 2022 and 2021, the Company recognized $2.2 million and $13.2 million, respectively, of stock compensation expense in connection with the PSU awards. During the three months ended March 31, 2022, prior to the PSU modification, as a result of forecasted decreases in the compounded annual growth rate, the Company reduced the expected achievement of performance metrics and recognized a reduction in stock-based compensation expense. This reduction was offset by the incremental compensation expense recognized for the modified PSUs. As of June 30, 2022, there was $23.6 million of unrecognized compensation expense related to unvested PSUs which is expected to be recognized over a weighted-average period of approximately 1.92 years. Compensation cost is recognized under the accelerated method and is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions.

The following table summarizes the Company’s RSU and PSU activity:


	Number of Shares
Outstanding at December 31, 2021		1,579,738
Granted		2,712,822
Vested		(288,325	)
Forfeited		(496,975	)
Outstanding at June 30, 2022		3,507,260

During the three months ended March 31, 2022, the Company issued market-based grants, which are payable in cash to partially settle a vendor contract. The grants vest contingent upon the achievement of pre-determined market and service conditions. Cash payment at settlement will range from zero to approximately $1.3 million based on the Company’s total stockholder return (“TSR”) relative to the performance of peer companies through September 2023. The market-based grants are classified as a liability on the Company’s balance sheet and will be remeasured at each reporting period until settlement. Fair value of the market-based grants at the grant date and as of June 30, 2022 was $0.4 million and $0.3 million, respectively. During the three and six months ended June 30, 2022, the Company recognized $0.3 million and $0.3 million, respectively, of stock compensation expense in connection with these awards.

Fair value of the market-based grants is determined using the Monte-Carlo simulation with the following assumptions:


	Three Months Ended June 30, 2022	Six Months Ended June 30, 2022
Market-Based Grants:
Expected term (in years)	1.23	1.23 - 1.50
Expected volatility	66%	58% - 66%
Risk-free interest rate	2.81%	1.97% - 2.81%
Dividend rate	0%	0%

The Company recorded the total stock-based compensation expense as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cost of revenue	$	1,442	$	819	$	2,259	$	1,818
Sales and marketing		6,311		5,579		7,606		9,321
Research and development		4,231		2,562		5,954		4,590
General and administrative		4,227		6,545		6,476		12,461
Total	$	16,211	$	15,505	$	22,295	$	28,190

Stock-based compensation expense is recognized over the award’s expected vesting schedule, which is reduced for forfeitures.