Stockholders' equity

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stockholders' equity

12. Stockholders' equity

Preferred stock— In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 50,000,000 shares of undesignated preferred stock with a par value of $0.00001 per share with rights and preferences, including voting rights, designated from time to time by the board of directors.

Common stock— Common stockholders are entitled to one vote per share. Shares of common stock reserved for future issuance consisted of the following:

	December 31,	December 31,
	2023	2022
2010 Equity Incentive Plan:
Stock options outstanding	4,621,021	10,333,771
2021 Equity Incentive Plan:
RSUs outstanding and PSUs(1)	16,738,309	16,178,101
Shares available for future issuance under:
2021 Equity Incentive Plan	4,093,695	2,814,126
2021 Employee Stock Purchase Plan	2,350,803	1,929,578
Total shares of common stock reserved	27,803,828	31,255,576
(1) The number of PSUs reserved for issuance is based on the maximum achievement of the corporate performance metric.

Equity incentive plans— In 2010, the Company adopted the 2010 Equity Incentive Plan (the “2010 Plan”). The 2010 Plan provided for incentive stock options (“ISOs”), non-statutory stock options (“NSOs”, collectively with ISOs, “stock options”), SARs, restricted stock, and restricted stock units (“RSUs”) to be granted to eligible employees, directors, and consultants. The 2010 Plan was terminated in October 2021 in connection with the IPO but continues to govern the terms and conditions of the outstanding awards granted pursuant to the 2010 Plan. No further equity awards will be granted under the 2010 Plan.

The Company adopted the 2021 Equity Incentive Plan (the "2021 Plan") in September 2021, which became effective on October 28, 2021 (collectively with the 2010 Plan, the “Equity Incentive Plans”) and was approved by the Company’s stockholders. The 2021 Plan provides for the granting of ISOs, NSOs, SARs, restricted stock, RSUs, and performance awards to eligible employees, directors, and consultants.

The Company initially reserved 13,800,000 shares for issuance under the 2021 Plan. The amount available for issuance is subject to an annual increase on the first day of each calendar year, beginning on January 1, 2023, in an amount equal to 5% of the outstanding shares of the Company’s common stock on the last day of the immediately preceding calendar year or a lesser amount determined by the Company’s Board of Directors or compensation committee. The amount available for issuance shall also include Returning Shares, which are any shares subject to awards granted under the 2010 Plan that, on or after October 29, 2021, expire or otherwise terminate without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest. Additionally, any difference in (i) the number of PSUs reserved for future issuance based on maximum achievement of the corporate performance metric and (ii) the number of PSUs issued based on actual attainment are returned to the 2021 Plan.

On January 1, 2023, the shares available for future grants under the 2021 Plan automatically increased by 7,250,689 pursuant to the above evergreen provision of the 2021 Plan.

Equity Exchange— On July 11, 2022, the Company launched an equity exchange program (the “Equity Exchange”) in which eligible employees and executives were able to exchange certain outstanding stock options and SARs, whether vested or unvested, with a per share exercise price equal to or greater than $11.13, for RSUs on a one-for-one basis. Upon expiration of the offer to exchange on August 6, 2022, 6,958,544 stock options and SARs (collectively, the “Exchanged Awards”) were canceled and immediately exchanged for an equivalent number of new RSUs, representing a participation rate by eligible awards of approximately 97%.

The incremental stock-based compensation expense associated with the Equity Exchange was calculated as the excess of the fair value of each new RSU awarded, as measured on the date exchanged, over the fair value of the corresponding Exchanged Awards, as measured immediately prior to the exchange closing on August 6, 2022. The fair value of the new RSUs was estimated using the fair value of the Company’s common stock on the exchange date. The following table summarizes the weighted-average assumptions used in the Black-Scholes option-pricing model to estimate the fair value of the Exchanged Awards as of August 6, 2022:

Risk-free interest rate	3.0%
Expected volatility	68.6%
Expected life (in years)	4.9
Expected dividend yield	—%

As a result of the Equity Exchange, there was $45.7 million in incremental stock-based compensation expense from the modification accounting. That amount, as well as the remaining unrecognized expense associated with the Exchanged Awards at the time of the exchange, began to be recognized on a straight-line basis over the requisite service period for the new RSUs, adjusted as needed for those new RSUs issued for certain Exchanged Awards whose per share exercise prices were lower than the Company’s stock price at the exchange date. The requisite service periods for the new RSUs was determined by the per share exercise price of the corresponding Exchanged Awards, ranging from two to three years.

Restricted stock units and performance-based restricted stock units— The fair value of RSUs and PSUs are determined using the fair value of the Company’s common stock on the date of grant. The Company recognizes stock-based compensation expense for RSUs with service-based vesting conditions on a straight-line basis over the requisite service period for each award, which typically vest over a three or four-year period. Management estimates the number of PSUs that are expected to vest based on the anticipated achievement of the specified performance metrics. If the performance-based vesting condition is considered probable of being achieved, the Company recognizes expense over the requisite service period based on the probable outcome of achievement. If the performance goals are not met, or are considered improbable, no compensation cost is recognized, and any previously recognized compensation cost is reversed.

During the first quarter of 2023, the Company granted 645,833 PSUs to certain executives at target. Each PSU conveys a right to receive one share of the Company’s common stock on the date it vests, provided that the number of PSUs that will ultimately vest may vary from 0% to 150% of target based upon the achievement of the corporate performance metric at the end of the performance period. One quarter of the eligible PSUs vest upon certification of the corporate performance metric by the Board of Directors’ compensation committee in the first quarter of 2024, and the remaining 75% will vest equally over the following 12 quarters thereafter, subject to continual service by the grantee. Total stock-based compensation expense to be recognized may fluctuate during the performance period due to changes in forecasted achievement. The corporate performance metric associated with these awards was considered probable of being achieved since the grant date, and, as of December 31, 2023, management calculated a payout rate equal to 70% of the number of target shares granted based on actual attainment of the metric.

A summary of RSU and PSU activity under the 2021 Plan is as follows:

	RSUs Outstanding	Weighted Average Grant Date Fair Value		PSUs Outstanding	Weighted Average Grant Date Fair Value
Unvested - December 31, 2022	16,178,101	$	17.37	—	$	—
Granted	8,159,808	$	9.86	645,833	$	8.89
Released	(6,134,641)	$	16.42	—	$	—
Canceled	(2,433,691)	$	15.93	—	$	—
Unvested - December 31, 2023	15,769,577	$	14.07	645,833	$	8.89

The weighted-average grant date fair value of RSUs that were granted during the fiscal years ended December 31, 2022 and 2021, was $13.79 and $27.64, respectively. No PSUs were granted prior to the fiscal year ended December 31, 2023.

The aggregate fair value of RSUs that vested during the fiscal years ended December 31, 2023 and 2022 was $68.4 million and $50.7 million, respectively. No RSUs vested during the fiscal year ended December 31, 2021.

As of December 31, 2023, total unrecognized stock-based compensation expense related to unvested RSUs was $192.4 million, which will be recognized over a weighted average period of 2.7 years.

As of December 31, 2023, total unrecognized stock-based compensation expense related to unvested PSUs was $2.0 million, which will be recognized over a weighted average period of 1.4 years.

Stock options— The Company may grant stock options at exercise prices not less than the fair market value at the date of grant. These options generally expire 10 years from the date of grant. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period for each award, which is generally even over four years.

The following is a summary of activity for stock options having only service-based vesting conditions under the Equity Incentive Plans:

	Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In Thousands)
Balance - December 31, 2022	10,283,771	$	4.18	6.38	$	66,234
Granted	—	—
Exercised	(5,477,153)	3.29
Canceled	(235,597)	7.58
Balance - December 31, 2023	4,571,021	$	5.08	3.23	$	44,309
Vested & expected to vest as of December 31, 2023	4,571,021	$	5.08	3.23	$	44,309
Exercisable as of December 31, 2023	4,405,278	$	4.96	3.23	$	43,157

There were no stock options granted during the fiscal years ended December 31, 2023 or 2022. The weighted average grant date fair value of stock options granted during the fiscal year ended December 31, 2021, was $16.01 per share.

Total aggregate intrinsic value of options exercised during the fiscal years ended December 31, 2023, 2022, and 2021 was $45.6 million, $13.7 million, and $59.7 million, respectively.

The decrease in weighted average remaining contractual term during the fiscal year ended December 31, 2023, is due to stock options held by the Company’s former CEO, Mr. Coccari, which will expire if not exercised by the end of the 90-day post-termination exercise window that begins upon completion of his transition agreement in February 2024.

As of December 31, 2023, total unrecognized stock-based compensation expense related to unvested stock options was immaterial.

The Company estimates the fair value of stock-based compensation for stock options by utilizing the Black-Scholes option-pricing model, which is dependent upon several variables, such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, and expected dividend yield rate over the expected option term. These amounts are estimates and, thus, may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The calculation of grant date fair value of stock options was based on the following weighted average assumptions:

	Fiscal Year Ended December 31,
	2021
Risk-free interest rate	1.0	%
Expected volatility	60.5	%
Expected life (in years)	6.0
Expected dividend yield	—	%

Stock appreciation rights— The Company may grant SARs at exercise prices not less than the fair market value at the date of grant. The SARs are liability-classified awards that generally expire 10 years from the date of grant. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period for each award, which is generally even over four years. Refer to Note 2 “Summary of Significant Accounting Policies—Stock-Based Compensation” for more information.

The following is a summary of activity for SARs under the Equity Incentive Plans:

	SARs Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In Thousands)
Balance - December 31, 2022	81,770	$	5.44	6.90	$	418
Granted	—	—
Exercised	(67,781)	5.30
Canceled	(9,289)	6.58
Balance - December 31, 2023	4,700	$	5.11	5.98	$	45
Vested & expected to vest as of December 31, 2023	4,700	$	5.11	5.98	$	45
Exercisable as of December 31, 2023	4,558	$	5.06	5.97	$	44

There were no SARs granted during the fiscal years ended December 31, 2023 or 2022. The weighted average grant date fair value of SARs granted during the fiscal year ended December 31, 2021, was $22.47 per share.

Total aggregate intrinsic value of SARs exercised during the fiscal year ended December 31, 2023 was $0.3 million and immaterial during the fiscal years ended December 31, 2022 and 2021.

As of December 31, 2023, total unrecognized stock-based compensation expense related to unvested SARs was immaterial.

The Company estimates the fair value of stock-based compensation for SARs by utilizing the Black-Scholes option-pricing model as described above. The calculation of grant date fair value was based on the following weighted average assumptions:

	Fiscal Year Ended December 31,
	2021
Risk-free interest rate	1.5	%
Expected volatility	60.9	%
Expected life (in years)	6.2
Expected dividend yield	—	%

Performance-based stock options— Under the Equity Incentive Plans, the Company may grant share-based awards whose vesting is contingent on meeting various departmental or company-wide performance goals, such as the achievement of certain sales targets or an IPO event, in lieu of or in addition to a service-based vesting condition (“Performance-Based Options”). Such awards are generally granted with an exercise price equal to the fair market value of the underlying common stock share on the date of grant and have a contractual term of 10 years. If vesting is dependent on satisfying a performance condition that is probable of being achieved, the Company estimates the expected term as the midpoint between the time at which the performance conditions are probable of being satisfied and the contractual term of the award. If vesting is dependent on satisfying a performance condition that is not probable of being achieved and the service period is not explicitly stated, the Company estimates the expected term as the contractual term. The remaining inputs to the Black-Scholes option pricing model used to determine grant date fair value, including risk-free interest, expected volatility, and expected dividend yield, are calculated using the same method as that used for stock options with service-based vesting conditions. Grants for Performance-Based Options are made out of the same pool of stock options available for future issuance under the Equity Incentive Plans.

Compensation expense for Performance-Based Options is based on the grant date fair market value. The Company recognizes expense for Performance-Based Options having either (a) multiple performance-based vesting conditions, or (b) performance and graded service-based vesting conditions, by separately attributing each vesting tranche of the award over the requisite service period applicable to each vesting condition. Management’s estimate of the number of shares expected to vest is based on the anticipated achievement of the specified performance goals. If the performance-based vesting condition is considered probable of being achieved, the Company recognizes expense over the remaining service period based on the probable outcome of achievement. If the performance goals are not met, no compensation cost is recognized, and any previously recognized compensation cost is reversed. For awards with both performance and service-based vesting conditions where the performance condition is considered improbable of being achieved, the Company does not recognize expense until the performance condition is satisfied, after which time expense is recognized over the requisite service period.

The Company had one Performance-Based Option outstanding as of December 31, 2023.The following table summarizes the activities of Performance-Based Options under the Equity Incentive Plans:

	Performance-Based Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In Thousands)
Balance - December 31, 2022	50,000	$	3.06	5.58	$	375
Granted	—	—
Exercised	—	—
Canceled	—	—
Balance - December 31, 2023	50,000	$	3.06	4.58	$	584
Vested & expected to vest as of December 31, 2023	50,000	$	3.06	4.58	$	584
Exercisable as of December 31, 2023	26,041	$	3.06	4.58	$	304

As of December 31, 2023, total unrecognized stock-based compensation expense related to unvested Performance-Based Options was immaterial.

Employee stock purchase plan— The 2021 Employee Stock Purchase Plan (the “ESPP”) became effective on October 29, 2021. The Company initially reserved 2,800,000 shares of the Company's common stock under the ESPP. Shares reserved for issuance shall increase on the first day of the fiscal year, beginning in fiscal 2023, in an amount equal to the least of 1% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, three times the initial number of shares reserved under the ESPP, or a lesser amount determined by the Company’s Board of Directors or compensation committee. On January 1, 2023, the shares available for future grants under the ESPP automatically increased by 1,450,137 pursuant to the above evergreen provision of the 2021 ESPP.

The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount of 15% during an offering period. Offering periods are 24-month periods beginning on the first trading day on or after May 20 or November 20 (defined as the enrollment date). Each offering period has four purchase periods which last approximately 6 months, or the length of time between exercise dates (defined as the first trading day on or after May 20 and November 20 of each purchase period), except that the first purchase period of any offering period is the time between the enrollment date and first exercise date. At the start of an offering period, eligible employees may elect to contribute up to 15% of their eligible compensation each payroll period during that offering period to purchase shares of common stock in accordance with the ESPP.

On each exercise date, eligible employees will purchase the Company’s common stock at a price per share equal to 85% of the lesser of the fair market value of the Company’s common stock on (i) the enrollment date or (ii) the exercise date. During the fiscal year ended December 31, 2023, 1,029,344 shares of common stock were issued under the ESPP.

In the event that the fair market value per share of the Company’s common stock at the end of a six-month purchase period is lower than the fair market value per share at the first day of the related offering period, the plan’s reset provision cancels the current offering period immediately after the purchase date and automatically re-enrolls participants in a new offering period. During the fiscal years ended December 31, 2023 and 2022, ESPP resets resulted in total modification charges of $5.9 million and $3.4 million, respectively, to be recognized on a straight-line basis over the new, respective offering periods.

The following table summarizes the weighted-average assumptions used in the Black-Scholes option-pricing model to estimate the grant date fair value of employee stock purchase rights granted under new ESPP offering periods in each year:

	Fiscal Year Ended December 31,
	2023	2022	2021
Risk-free interest rate	4.6%	3.5%	0.3%
Expected volatility	68.6%	68.5%	61.2%
Expected life (in years)	1.6	1.2	1.2
Expected dividend yield	—%	—%	—%

As of December 31, 2023, total unrecognized compensation cost for the ESPP was $8.1 million, which will be recognized over a weighted average period of 1.5 years.

Other equity transactions— During the fiscal year ended December 31, 2021, the Company issued 61,300 shares of Udemy restricted common stock to a former executive of CorpU at a grant date fair value per share of $34.14. As a result, the Company will recognize $2.1 million in total stock-based compensation expense on a straight line basis from August 2021 through August 2024.

During the fiscal year ended December 31, 2021, the Company facilitated a tender offer for certain eligible employees to sell 236,086 vested stock options and outstanding shares of common stock to an existing investor at a per share price of $23.75 per share. The Company recorded stock-based compensation of $1.6 million during the fiscal year ended December 31, 2021, in its consolidated statements of operations for the difference between the price paid and the fair value of the Company’s common stock on the date of the transaction.

Additionally, during the fiscal year ended December 31, 2021, the Company waived its right of first refusal and transfer restrictions with respect to certain transfers of outstanding common stock. Where the Company has concluded that such transfers included a deemed compensatory element as a result of both the Company’s role in facilitating the transfers and the buyers of the shares transferred having a pre-existing economic interest in the Company’s equity, the Company recorded stock-based compensation expense for the difference between the price paid and the fair market value on the date of the transaction. The Company recorded $4.0 million of stock-based compensation expense for such transactions during the fiscal year ended December 31, 2021.

Total stock-based compensation expense included in the consolidated statements of operations was as follows (in thousands):

	Fiscal Year Ended December 31,
	2023		2022		2021
Cost of revenue	$	7,006	$	5,360	$	1,623
Sales and marketing	30,859		29,054		8,637
Research and development	26,301		20,850		6,816
General and administrative	30,672		26,029		17,604
Restructuring charges	1,208		—		—
Total stock-based compensation expense	$	96,046	$	81,293	$	34,680

The Company capitalized $9.0 million and $5.8 million of $2.5 million of stock-based compensation expense as capitalized software during the fiscal years ended December 31, 2023, 2022, and 2021, respectively.