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Stock-based Compensation
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
2021 Equity Incentive Plan
In May 2021, the Company’s board of directors (the “Board”) adopted, and the stockholders approved, the 2021 Equity Incentive Plan (the “2021 Plan”) with the purpose of granting stock-based awards, including stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance awards, and other forms of awards, to employees, directors, and consultants. As of December 31, 2022, a total of 37,664,961 shares of common stock were authorized for issuance under the 2021 Plan. The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to either (i) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or (ii) a lesser number of shares determined by the Board prior to the applicable January 1. Accordingly, on January 1, 2023, the number of shares of common stock that may be issued under the 2021 Plan increased by an additional 6,957,976 shares. As a result, as of June 30, 2023, a total of 44,622,937 shares of common stock are authorized for issuance under the 2021 Plan. As of June 30, 2023, a total of 32,659,849 shares of common stock were available for issuance under the 2021 Plan. No stock options have been issued under the 2021 Plan.
Stock options
No stock options were granted during the periods presented.
The following table summarizes the stock option activity during the six months ended June 30, 2023:
Number of
Shares		Weighted-
Average
Exercise Price
Outstanding at December 31, 20225,723,772$12.65 
Exercised(821,360)13.34 
Canceled/Forfeited(5,078)21.36 
Outstanding at June 30, 20234,897,33412.53 
Exercisable at June 30, 20234,879,584$12.48 
As of June 30, 2023, the total unrecognized stock‑based compensation cost for unvested stock options was $0.1 million, which is expected to be recognized over a weighted-average period of 0.2 years.
Restricted stock units
In 2018, the Company began issuing RSUs to certain employees, officers, non-employee consultants, and directors. Substantially all of the RSUs granted subsequent to the Company’s initial public offering (“IPO”) vest based solely on continued service, which is generally over four years, on either a quarterly or annual vesting schedule.
The following table summarizes the RSU activity during the six months ended June 30, 2023:
Number of
Shares		Weighted-
Average Grant
Date Fair Value
Outstanding at December 31, 20228,495,298$57.94 
Granted3,072,20759.22 
Vested(1,903,845)53.16 
Canceled/Forfeited(772,044)67.57 
Outstanding at June 30, 20238,891,616$58.57 
As of June 30, 2023, the total unrecognized stock‑based compensation cost for all RSUs outstanding was $451.9 million, which is expected to be recognized over a weighted‑average vesting period of 2.7 years.
Restricted stock awards
In November 2021, the Company issued 199,670 RSAs to certain key employees in connection with the acquisition of Levelset that vest based on their continued service over a two-year period. The fair value of the RSAs issued was $95.05 per share, which was the closing trading stock price of the Company’s common stock on the acquisition date. These shares are released from restriction quarterly over a two-year period assuming the continued service of the employees. During the six months ended June 30, 2023, the Company recognized $5.3 million in stock-based compensation related to RSAs whose vesting was accelerated upon the departure of certain employees. The Company also expensed $3.4 million during the six months ended June 30, 2023 related to the accelerated vesting of cash retention amounts upon such employees’ departures, which were recorded in prepaid expenses and other current assets as of December 31, 2022.
As of June 30, 2023 and December 31, 2022, 188,149 and 99,833 shares have vested, respectively. During the six months ended June 30, 2023 and 2022, the Company recognized stock-based compensation expense of $7.1 million and $4.7 million, respectively, relating to these shares.
Employee Stock Purchase Plan
In May 2021, the Board adopted, and the stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effective date of the Company’s IPO. A total of 2,600,000 shares of common stock were initially reserved for issuance under the ESPP. The number of shares of the Company’s common stock reserved for issuance under the ESPP automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year; and (ii) 3,900,000 shares, except before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii). Accordingly, on January 1, 2023, the number of shares of common stock reserved under the ESPP increased by an additional 1,391,595 shares.
The offering periods are scheduled to start in May and November of each year. The ESPP provides for consecutive offering periods that will typically have a duration of 12 months in length and comprise two purchase periods of six months in length, subject to reset and rollover provisions.
The ESPP provides eligible employees with an opportunity to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible compensation, subject to a maximum of $25,000 of stock per calendar year. A participant may purchase a maximum of 2,500 shares of common stock during a purchase period. Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each six-month purchase period. The purchase price of the shares will be 85% of the lower of the fair market value of the common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the related offering period. However, in the event the fair value of the common stock on the purchase date is lower than the fair value on the first trading day of the offering period, the offering period is terminated immediately following the purchase and a new offering period begins the following day. Participants may generally end their participation at any time prior to the last 15 days of a purchase period and will be repaid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment.
The fair value of the ESPP purchase rights on the date of grant using the Black-Scholes option pricing model was estimated using the following assumptions during the six months ended June 30, 2023:
Risk-free interest rate
4.68% to 5.17%
Expected term (in years)
0.5 to 1.0
Estimated dividend yield0.00%
Estimated weighted-average volatility
58.00% to 64.76%
The term for the ESPP purchase rights is the offering period. Given the Company's limited trading history, the Company continues to estimate volatility using the historical volatilities of a group of public companies in a similar industry and stage of life cycle, selected by management, in addition to considering the Company's own historical volatility, for a period commensurate with the term of the ESPP purchase rights. The interest rate is derived from government bonds with a similar term to the ESPP purchase right granted. The Company has not declared, nor does it expect to declare, dividends in the foreseeable future. Consequently, an expected dividend yield of zero is utilized. The fair value of the Company’s common stock used to value ESPP purchase rights is based on the trading price of our publicly traded common stock.
Employee payroll contributions accrued in connection with the ESPP were $4.9 million and $4.7 million as of June 30, 2023 and December 31, 2022, respectively, and are included within accrued expenses in the condensed consolidated balance sheet. Employee payroll contributions ultimately used to purchase shares will be reclassified to stockholders’ equity on the purchase date. Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period. During the six months ended June 30, 2023 and 2022, the Company recorded stock-based compensation of $4.7 million and $6.7 million, respectively, in connection with the ESPP and 316,042 and 286,997 shares of the Company’s common stock, respectively, were purchased under the ESPP.
As of June 30, 2023, unrecognized stock-based compensation expense related to the ESPP was $10.5 million, which is expected to be recognized over a weighted-average period of 0.6 years.
Stock-based compensation
The Company recorded total stock-based compensation cost from stock options, RSUs, RSAs, and the ESPP as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cost of revenue$1,927 $2,046 $3,578 $3,504 
Sales and marketing14,411 12,572 27,471 22,868 
Research and development16,269 13,144 36,048 26,152 
General and administrative9,880 6,133 20,328 18,580 
Total stock-based compensation expense$42,487 $33,895 $87,425 $71,104 
Stock-based compensation capitalized for software development and cloud-computing arrangement implementation costs2,161 1,895 4,283 4,061 
Total stock-based compensation cost$44,648 $35,790 $91,708 $75,165