In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Equity Incentive Plan. The 2021 Equity Incentive Plan is a successor to and continuation of the 2013 Stock Plan. The 2021 Equity Incentive Plan became effective on the date of the IPO with no further grants being made under the 2013 Stock Plan, however, awards outstanding under the 2013 Stock Plan will continue to be governed by their existing terms. The 2021 Equity Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units awards (“RSUs”), performance awards, and other awards to employees, directors, and consultants. Shares issued pursuant to the exercise of these awards are transferable by the holder.

In February 2023, the Company initiated a restructuring plan to adjust its cost structure and accelerate its timeline to achieve greater than 20% adjusted free cash flow margins (the “Restructuring Plan”), which includes both the elimination of positions across the Company as well as the shifting of additional positions across a broader geographical footprint. In connection with the Restructuring Plan, the Company recorded $3,937 of stock-based compensation related to the accelerated vesting of certain restricted stock, performance-based restricted stock units (“PRSUs”), and RSU awards during the nine months ended September 30, 2023. Refer to Note 13, Restructuring, for further details of the Restructuring Plan.

Stock options granted have a maximum term of ten years from the grant date, are exercisable upon vesting and vest over a period of four years. Stock option activity for the nine months ended September 30, 2023 was as follows:


	Number of Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Life in Years	Aggregate Intrinsic Value
Outstanding at January 1, 2023	10,153,916	$	7.23	6.16	$	185,188

Granted	46,799	28.86
Exercised	(2,230,603)	6.89
Forfeited or cancelled	(408,105)	10.76
Outstanding at September 30, 2023	7,562,007	$	7.27	5.40	$	126,991
Vested and exercisable at September 30, 2023	6,899,260	6.64		5.24	120,046
Vested and unvested expected to vest at September 30, 2023	7,466,772	$	7.18	5.38	$	126,055

The aggregate intrinsic value represents the difference between the fair value of common stock and the exercise price of outstanding in-the-money options. The aggregate intrinsic value of exercised options for the nine months ended September 30, 2023 and 2022 was $64,463 and $78,012, respectively. The tax benefit from stock options exercised was

During the nine months ended September 30, 2023, 46,799 options were granted. No options were granted during the nine months ended September 30, 2022. The aggregate estimated fair value of stock options granted to participants that vested during the nine months ended September 30, 2023 and 2022 was $10,284 and $13,452, respectively.

As of September 30, 2023, there was $7,630 of unrecognized stock-based compensation related to outstanding stock options granted that is expected to be recognized over a weighted-average period of 0.94 years.

RSUs granted typically vest over four years. RSU activity for the nine months ended September 30, 2023 was as follows:


	Shares	Weighted-Average Fair Value
Unvested balance at January 1, 2023	4,802,435	$	44.25
Granted	5,337,840	35.03
Vested	(1,434,162)	41.14
Forfeited or cancelled	(1,852,745)	45.08
Unvested balance at September 30, 2023	6,853,368	37.49
Vested and expected to vest at September 30, 2023	4,514,288	$	37.61

As of September 30, 2023, there was $155,162 of unrecognized stock-based compensation related to outstanding RSUs granted that is expected to be recognized over a weighted-average period of 2.89 years.


	Shares	Weighted-Average Fair Value
Unvested balance at January 1, 2023	666,122	$	57.41
Granted	1,118,528	31.75
Vested	(51,594)	41.24
Forfeited or cancelled	(325,057)	38.54
Adjusted by performance factor	(436,387)	60.72
Unvested balance at September 30, 2023	971,612	$	33.92

At the end of each reporting period, the Company will adjust compensation expense for the PRSUs based on its best estimate of attainment of specified performance metrics. The cumulative effect on current and prior periods of a change in the estimated number of PRSUs that are expected to be earned during the performance period will be recognized as an adjustment to earnings in the period of the revision. Compensation cost in connection with the probable number of shares that will vest will be recognized using the accelerated attribution method.

The Company grants Long Term Incentive Plan (“LTIP”) PRSUs to certain executives of the Company during the first fiscal quarter. A percentage of the LTIP PRSUs will become eligible to vest based on the Company’s financial performance level at the end of each fiscal year. The financial performance level is determined as the percentage equal to the sum of the revenue growth percentage and profitability percentage.

The number of LTIP PRSUs received will depend on the achievement of financial metrics relative to the approved performance targets. Depending on the actual financial metrics achieved relative to the target financial metrics throughout the defined performance period of the award, the number of LTIP PRSUs that vest could range from 0% to 200% of the target amount and are subject to the Board of Directors’ approval of the level of achievement against the approved performance targets.

Assuming the minimum performance target is achieved, one-third of the aggregate number of the LTIP PRSUs shall vest on the later of (i) March 1 of the year after grant or (ii) two trading days following the public release of the Company’s financial results, and the remainder shall vest in eight equal quarterly installments subject, in each case, to the individual’s continuous service through the applicable vesting date.

On February 24, 2022, the financial performance of the LTIP PRSUs granted in 2021 was determined to be achieved at 155% of the target amount. This resulted in a performance factor reduction of 89,769 shares from the original maximum shares achievable of 398,949.

On February 16, 2023, it was determined that the financial performance of the LTIP PRSUs granted in 2022 was not achieved. This resulted in a performance factor reduction of 436,387 shares from the original maximum shares achievable of 436,387.

On March 1, 2023, the Company granted an LTIP PRSU award (the “2023 LTIP PRSU”) with a maximum shares achievable of 1,118,528, subject to the actual financial metrics achieved relative to the target financial metrics for fiscal year 2023. As of September 30, 2023, the Company determined that it was probable that a percentage of the 2023 LTIP PRSUs granted with respect to the Company’s 2023 financial performance would vest.

As part of the Restructuring Plan, 20,000 PRSU shares were deemed achieved and will vest in early fiscal year 2024. This resulted in $1,262 of stock-based compensation, which was included in Restructuring and other charges in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2023.

During the period ended June 30, 2023, 40,000 PRSUs shares were deemed achieved and will vest in early fiscal year 2024. This resulted in $2,524 of stock-based compensation, which was included in Research and development in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2023.

On July 27, 2021, the Company’s Board of Directors granted a market-based restricted stock unit (“MRSU”) award for 3,000,000 shares of the Company’s common stock to the Company’s CEO, Yancey Spruill, which will vest upon the satisfaction of certain service conditions and the achievement of certain Company stock price goals, as described below.

The MRSU, which has a grant date fair value of $75,300 derived by using a discrete model based on multiple stock price-paths developed through the use of a Monte Carlo simulation, is divided into five tranches that will be earned based on the achievement of stock price goals, measured based on the average of the Company’s closing stock price over a consecutive ninety (90) trading day period during the performance period as set forth in the table below.

To the extent earned based on the stock price targets set forth above, the MRSU will vest over a seven-year period beginning on the date of grant in annual amounts equal to 14%, 14%, 14%, 14%, 14%, 15% and 15%, respectively, on each anniversary of the date of grant.

On August 24, 2023, the Company announced its implementation of a leadership succession plan to identify the Company’s next CEO. Yancey Spruill will continue to serve as CEO until a successor has been appointed, at which point he will step down from his role as CEO and as a member of the Board. As a result, and in accordance with the Company’s accounting policy, $31,279 of recognized stock-based compensation related to the MRSUs was estimated to be forfeited and therefore reversed for the three and nine months ended September 30, 2023.

In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Employee Stock Purchase Plan (“ESPP”). Eligible employees enroll in the offering period at the start of each purchase period, whereby they may purchase a number of shares at a price per share equal to 85% of the lesser of (1) the stock price at the employee’s first participation in the offering period or (2) the fair market value of the Company’s common stock on the purchase date. After the end of an offering period, a new offering will automatically begin on the date that immediately follows the conclusion of the preceding offering.

A new offering period commenced on May 23, 2022 and was scheduled to consist of two purchase periods, with purchase dates of November 18, 2022 and May 19, 2023 (the “First 2022 Offering”). In connection with the purchase period that ended on November 18, 2022, there were 111,851 shares of common stock, net of shares withheld for taxes, purchased by employees at a price of $24.03. Under the terms of the ESPP, since the Company’s stock price on the first day of the purchase period beginning on November 21, 2022 was lower than the stock price at the beginning of the First 2022 Offering, the First 2022 Offering terminated and a new 12 month offering automatically commenced on November 21, 2022, with scheduled purchase dates on May 19, 2023 and November 20, 2023 (the “Second 2022 Offering”). In connection with the purchase period that ended on May 19, 2023, there were 120,348 shares of common stock, net of shares withheld for taxes, purchased by employees at a price of $23.51.

The termination of the First 2022 Offering and commencement of the Second 2022 Offering was accounted for as a modification, which resulted in an incremental stock-based compensation of $2,069, which will be recognized over the remaining term of Second 2022 Offering.

During the three months ended September 30, 2023 and 2022, the Company recorded stock-based compensation associated with the ESPP of $689 and $902, respectively, and $1,909 and $3,441 for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, $1,899 has been withheld on behalf of employees.

In connection with the closing of the Nimbella acquisition on September 1, 2021, the Company issued 200,204 shares of restricted stock for $63.11 per share for a total value of $12,635 to the founders of Nimbella. These shares vest equally on March 1, 2023 and September 1, 2024 and are expensed on a straight line basis over 36 months. The restricted stock is subject to forfeiture and dependent upon each founder’s continuous service on the vesting date.

As part of the Restructuring Plan, during the three months ended March 31, 2023, 33,963 shares of restricted stock that were issued to a former founder were vested upon the employee’s departure and $2,147 of stock-based compensation was included in Restructuring and other charges in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023.

During the three months ended June 30, 2023, 66,139 shares of restricted stock that were issued to the two remaining founders of Nimbella were vested upon their departure. This resulted in $3,946 of stock-based compensation which was included in Research and development in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023.

For the restricted shares, there was no stock-based compensation recognized for the three months ended September 30, 2023. Total stock-based compensation for the three months ended September 30, 2022 was $1,053. Total stock-based compensation was $4,879 and $3,159 for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the restricted shares in connection with the Nimbella acquisition have been fully amortized.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Cost of revenue	$	497	$	492	$	1,350	$	1,405
Research and development	9,502		8,236		35,280		28,617
Sales and marketing	4,701		3,356		11,759		10,553
General and administrative	(17,071)		11,510		13,263		37,183
Restructuring and other charges	—		—		3,937		—
Total stock-based compensation	$	(2,371)	$	23,594	$	65,589	$	77,758
Excess income tax (expense) benefit related to stock-based compensation	$	(787)	$	1,449	$	4,572	$	17,835

In September 2023, certain executives had the terms of their equity awards amended, which could result in approximately 700,000 awards accelerating up to twelve months in the event the individuals are terminated without cause or resign for good reason, as defined in their amended employment agreement.