Stock-Based Compensation Expense

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

(a)General

Stock-based compensation expense for restricted stock units, stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Stock-based compensation expense:
Cost of revenue	$	1,131	$	718	$	2,062	$	1,291
Research and development	6,389		4,054		11,034		7,228
Sales and marketing	4,345		2,942		8,023		5,406
General and administrative	4,581		2,716		8,674		5,139
Total stock-based compensation expense	$	16,446	$	10,430	$	29,793	$	19,064

We recognize compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally four years.

In the first quarter of 2020, our Compensation Committee adopted and approved the performance goals, targets and payout formulas for 2020 under our bonus plans, including permitting our executive officers and other employees the opportunity to receive payment of their earned bonuses for fiscal year 2020 in the form of common stock (in lieu of cash). During the three and six months ended June 30, 2020, we recognized stock-based compensation expense related to such bonuses in the amount of $0.4 million and $0.8 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of June 30, 2020. For all employees, including executive officers, who elected to receive their 2020 bonuses in the form of common stock (in lieu of cash), the payouts are expected to be made in the form of fully vested stock awards in the first quarter of 2021 pursuant to our 2015 Equity Incentive Plan, as amended. The number of shares underlying such awards shall be determined by dividing the dollar value of the actual bonus award payment by the closing price per share of our common stock on the date of grant.

(b)Restricted Stock Units

Restricted stock unit activity during the six months ended June 30, 2020 was as follows:


	Shares	Weighted-Average Grant Date Fair Value
Unvested balance as of December 31, 2019	2,936,924	$	32.43
Granted	1,548,989	56.48
Vested	(723,742)	32.01
Forfeited	(122,463)	36.03
Unvested balance as of June 30, 2020	3,639,708	$	42.65

As of June 30, 2020, the unrecognized compensation expense related to our unvested restricted stock units expected to vest was $145.2 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.6 years.

(c)Stock Options

Stock option activity during the six months ended June 30, 2020 was as follows:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2019	2,705,458	$	10.18
Granted	—	—
Exercised	(284,962)	13.10			$	10,137
Forfeited/cancelled	(16,484)	17.01
Outstanding as of June 30, 2020	2,404,012	$	9.79	4.5	$	99,113
Vested and exercisable as of June 30, 2020	2,171,711	$	9.20	4.3	$	90,811

As of June 30, 2020, the unrecognized compensation expense related to our unvested stock options expected to vest was $1.4 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 0.8 years.

The total fair value of stock options vested in the six months ended June 30, 2020 was $1.3 million.

(d)Employee Stock Purchase Plan

Under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (ESPP), employees may set aside up to 15% of their gross earnings, on an after-tax basis, to purchase our common stock at a discounted price, which is calculated at 85% of the lesser of: (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date.

On March 15, 2019, we issued 110,822 shares of common stock to employees for aggregate proceeds of $2.6 million. The purchase prices of the shares were $30.46 and $21.96 per share, which were discounted in accordance with the terms of the ESPP from the closing prices of our common stock on September 17, 2018 of $35.84 and on March 16, 2018 of $25.84, respectively.

On September 13, 2019, we issued 74,221 shares of common stock to employees for aggregate proceeds of $2.9 million. The purchase prices of the shares were $30.46 and $42.22 per share, which were discounted in accordance with the terms of the ESPP from the closing prices of our common stock on September 17, 2018 of $35.84 and on September 13, 2019 of $49.67, respectively.

On March 15, 2020, we issued 101,806 shares of common stock to employees for aggregate proceeds of $3.3 million. The purchase price of the shares was $32.87 per share, which was discounted in accordance with the terms of the ESPP from the closing price of our common stock on March 13, 2020 of $38.67.