Stockholders' Equity

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Preferred Stock—Under the Company’s amended and restated certificate of incorporation, which became effective upon completion of the Company’s IPO on November 8, 2021, the Company is authorized to issue 5.0 million shares of preferred stock with a par value of $0.0001 per share. The Company’s Board of Directors may fix the rights, preferences, privileges and restrictions of the preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of the Company’s common stock. There were no shares of preferred stock outstanding as of December 31, 2022 or 2021.

Common Stock—Under the Company’s amended and restated certificate of incorporation, which became effective upon completion of the Company’s IPO on November 8, 2021, the Company is authorized to issue 296.7 million shares of common stock with a par value of $0.0001 per share, including 265.0 million shares of Class A common stock and 31.7 million shares of Class B common stock. In connection with the Company’s IPO, all 31.7 million shares of the Company’s then-outstanding Class F common stock were converted into an equal number of shares of Class B common stock.

Holders of all classes of common stock are entitled to dividends when, as and if, declared by the Company’s Board of Directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. The holder of each share of Class A common stock is entitled to one vote, while the holder of each share of Class B common stock is entitled to 10 votes. Prior to the Company’s IPO, the holder of each share of Class F common stock was entitled to 10 votes and the holders of Class G common stock were not entitled to vote.

Shares of Class B common stock are convertible, at any time at the option of the holder, into an equal number of shares of Class A common stock and automatically convertible upon Transfer, as defined below. Prior to the Company’s IPO, shares of Class F common stock and Class G common stock were convertible into an equivalent number of shares of Class A common stock and generally converted into shares of Class A common stock upon Transfer, as defined below. Class F common stock was convertible at the option of the holder at any time upon written notice to the transfer agent of the corporation and was automatically convertible upon Transfer. Class G common stock was not convertible at the option of the holder and was only automatically convertible upon Transfer.

Transfer is defined as any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law.

As of December 31, 2022 and 2021, there were 43.4 million and 35.0 million shares of Class A common stock issued and outstanding, respectively. Shares of Class B common stock issued and outstanding were 31.7 million as of both December 31, 2022 and 2021.

On November 8, 2021, the Company completed its IPO, in which the Company sold 8.3 million shares of its Class A common stock, which includes the exercise in full of the underwriters’ option to purchase 1.1 million shares of Class A common stock, at a public offering price of $18.00 per share. The net proceeds to the Company from the IPO were $140.0 million after deducting underwriting discounts and commissions of $10.1 million. Additionally, the Company incurred offering costs of $5.2 million related to the IPO.

In November 2020, the Company entered into a Class A Common Stock Purchase Agreement to sell shares of Class A common stock at $14.00 per share. The Company sold and issued approximately 3.9 million shares for gross proceeds of $54.3 million.

Common Stock Transfers and Repurchase—In February 2021, the Company waived its right of first refusal and the CEO entered into a stock transfer agreement to sell approximately 0.1 million shares of Class A common stock to an existing investor at $14.00 per share for an aggregate purchase price of $2.1 million. The price per share was equivalent to the estimated fair value of the Company’s common stock on December 31, 2020 as determined by its Board of Directors with the assistance of a third-party valuation specialist.

In January 2021, the Company waived its right of first refusal and the CEO entered into a stock transfer agreement to sell approximately 1.1 million shares of Class F common stock to an existing investor at $14.00 per share for an aggregate purchase price of $15.0 million. Upon consummation of the sale to the third party, the shares of Class F common stock were automatically converted into shares of Class A common stock on a 1:1 basis in accordance with the rights and preferences of the Class F common stock. The price per share was equivalent to the estimated fair value of the Company’s common stock on December 31, 2020 as determined by its Board of Directors with the assistance of a third-party valuation specialist.

Also in January 2021, the Company entered into a repurchase agreement with the CEO to repurchase approximately 0.9 million shares of Class F common stock at $14.00 per share for an aggregate purchase price of $12.4 million.

In December 2020, the Company waived its right of first refusal and the CEO entered into a stock transfer agreement to sell approximately 0.5 million shares of Class F common stock to a third party at $14.00 per share for an aggregate purchase price of $7.7 million. Upon consummation of the sale to the third party, the 0.5 million shares of Class F common stock were automatically converted into shares of Class A common stock on a 1:1 basis in accordance with the rights and preferences of the Class F common stock. No compensation expense was recorded on this transaction as management concluded that it was not a mechanism to provide compensation to employees, but rather an arms-length transaction between willing buyers and willing sellers, at a price per share determined by a third party.

In February 2020, four new investors led an offer to purchase approximately 1.7 million shares of Class A common stock from existing employees and service providers that hold common stock and vested options at a price of $14.00 per share for an aggregate purchase price of $23.8 million. The transaction was initiated by, and the purchase price was set by, the new investors. No compensation expense was recorded on the transaction as management concluded that it was not a mechanism to provide compensation to employees, but rather an arms-length transaction between willing buyers and willing sellers, at a price per share determined by a third party.

Common Shares Reserved for Future Issuance

The Company had reserved the following shares of Class A common stock for future issuance:

(in thousands)
As of December 31,	2022	2021
Shares outstanding from stock options and restricted stock units	13,517	10,261
Shares available for future equity award grants	7,554	3,679
Shares available for future ESPP offerings	201	841
Total shares reserved	21,272	14,781

Equity Incentive Plans—In 2012, the Company’s Board of Directors approved the adoption of the 2012 Equity Incentive Plan (the 2012 Plan). In October 2021, the Company’s Board of Directors approved the adoption of the 2021 Equity Incentive Plan (the 2021 Plan) and the termination of the 2012 Plan, both of which became effective in connection with the Company’s IPO completed on November 8, 2021.

The 2021 Plan had an initial authorization to grant share-based awards for up to 4.1 million shares of Class A common stock, and additionally provides that any shares subject to outstanding awards under the 2012 Plan that are terminated, expire, are forfeited due to a failure to vest, are reacquired or withheld to satisfy a tax withholding obligation or to satisfy the purchase price or exercise price of a stock award will be added to the 2021 Plan and made available for future issuance. The termination of the 2012 Plan had no impact on the terms of outstanding awards under that plan. At the Company’s 2022 annual meeting of stockholders on May 25, 2022, the stockholders approved an amendment to the 2021 Equity Incentive Plan to increase the aggregate number of shares of Class A common stock reserved for issuance thereunder by 8.0 million shares. The number of shares of Class A common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each calendar year, starting January 1, 2023 and ending on and including January 1, 2031, in an amount equal to 5% of the total number of shares of the Company’s capital stock outstanding on December 31 of the prior calendar year, unless the Company’s Board of Directors determines prior to the date of increase that there will be a lesser increase, or no increase.

Additionally, concurrent with the closing of the acquisition of OTB on July 11, 2022, the Compensation Committee of the Company’s Board of Directors granted RSU awards under the Inducement Plan to employees of OTB who were offered employment with the Company. See Note 5—Business Combination for further discussion. The 2021 Plan and the predecessor 2012 Plan, both as amended, along with the Inducement Plan (collectively, the Plans) provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock units and restricted stock awards to employees, non-employee directors and consultants of the Company. Options to purchase Class A common stock granted under the Plans continue to vest until the last day of employment and generally will vest 25% in the first year and monthly thereafter (for a total vesting period of 4 years), and expire 10 years from the date of grant. Class A common stock awards are generally issued to officers, directors, employees and consultants, and vest according to an award-specific schedule as approved by the Board of Directors.

The exercise price of incentive stock options granted under the Plans must be at least equal to 100% of the fair market value of the Company’s Class A common stock at the date of grant, as determined by the Board of Directors. The exercise price must not be less than 110% of the fair market value of the Company’s Class A common stock at the date of grant for incentive stock options granted to an employee that owns greater than 10% of the Company stock.

A summary of the Company’s stock option activity for its Plans is as follows:

	Outstanding Stock Options (in thousands)	Weighted Average Exercise Price	Weighted Average Contractual Life (Years)	Aggregate Intrinsic Value (in millions)
Balance as of December 31, 2021	6,443	$8.84	6.5	$45.3
Granted	1,324	$10.70
Exercised	(1,346)	$5.93
Cancelled/forfeited	(309)	$10.38
Balance as of December 31, 2022	6,112	$9.81	6.7	$11.9
Vested and exercisable as of December 31, 2022	3,861	$8.03	5.6	$11.2

The weighted-average grant-date fair value of options granted during 2022, 2021 and 2020 was $5.54, $9.60 and $6.28 per share, respectively. The intrinsic value of options exercised was $6.7 million, $30.0 million and $25.9 million during 2022, 2021 and 2020, respectively.

Total unrecognized compensation cost related to non-vested stock options granted under the Plans was $15.6 million as of December 31, 2022, with the cost expected to be recognized over a weighted-average period of 2.6 years.

The Company estimates the fair values of options awarded on the date of grant using the Black-Scholes-Merton option-pricing model, which requires inputs, including the fair value of common stock, expected term, expected volatility, risk-free interest and dividend yield.

The Company estimates the expected term of options using the simplified method described in Staff Accounting Bulletin Topic 14, as amended, as it does not have sufficient historical experience for determining the expected term of the awards granted. Expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant. The expected dividend yield was 0% as the Company has not paid, and does not expect to pay, cash dividends. For awards granted prior to the IPO, the Company’s Board of Directors considered numerous objective and subjective factors to determine the fair value of the Company’s Class A common stock at each meeting at which awards were approved. These factors included, but were not limited to (i) contemporaneous third-party valuations of Class A common stock; (ii) the rights and preferences of Redeemable Convertible Preferred Stock compared to Class A common stock; (iii) the lack of marketability of Class A common stock; (iv) developments in the business; and (v) the likelihood of achieving a liquidity event, such as an IPO or a sale of the Company, given prevailing market conditions.

The per-share fair value of each stock option was determined on the date of grant using the following weighted-average assumptions and ranges of fair value of common stock:

Year Ended December 31,	2022		2021		2020
Expected volatility	52.5	%	53.7	%	52.2	%
Expected term (in years)	6.0		6.0		6.1
Expected dividend yield	0	%	0	%	0	%
Risk-free interest rate	2.6	%	1.1	%	0.6	%

In March 2021, the Company entered into an Option Cancellation Agreement with a former member of its Board of Directors and his affiliated entity, pursuant to which the Company cancelled options to purchase an aggregate of 0.2 million shares of Class A common stock. The total consideration paid for the option cancellation was $2.4 million, of which $1.0 million was recognized as compensation expense for the excess amount paid over the purchase-date fair market value of the options.

In August 2019, the Company entered into an Option Cancellation Agreement with a former member of its Board of Directors and his affiliated entity, pursuant to which the Company cancelled an option to purchase 0.1 million shares of Class A common stock held by Camelot Financial Capital Management LLC for consideration equal to $10.20 per share, minus the exercise price for the shares underlying such option. The total consideration paid to Camelot Financial Capital Management LLC was $0.8 million.

Restricted Stock Units—The Plans also provide for the issuance of RSUs of the Company’s common stock to eligible participants. During 2020, the Company began issuing RSUs to certain employees and directors under the 2012 Plan. These RSUs are subject to service-based vesting conditions. The service-based vesting condition is generally satisfied over four years.

A summary of the Company’s outstanding nonvested RSUs for its Plans is as follows:

	Number of Units (in thousands)	Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2021	3,818	$	18.07
Granted	6,416	$	10.47
Vested	(1,521)	$	16.12
Forfeited	(1,308)	$	15.65
Nonvested as of December 31, 2022	7,405	$	12.27

The total fair value of shares that vested under RSUs was $17.7 million and $12.2 million during 2022 and 2021, respectively.

Unrecognized compensation cost related to RSUs was $84.1 million as of December 31, 2022, with these costs expected to be recognized over a weighted-average period of approximately 2.9 years.

Employee Stock Purchase Plan—The Company sponsors an ESPP which became effective in connection with the Company’s IPO completed on November 8, 2021. The ESPP allows eligible employees to buy shares of the Company’s Class A common stock at a 15% discount of the stock’s market value on defined dates. The ESPP authorizes the issuance of 0.8 million shares of the Company’s Class A common stock under purchase rights granted to eligible employees, with automatic increases in the number of shares reserved for issuance on January 1 of each calendar year, beginning in 2023 and through 2031, subject to terms of the ESPP. There were 0.6 million shares of the Company’s Class A common stock purchased under the ESPP during 2022. Prior to capitalizing amounts related to software development costs, the Company recognized stock-based compensation related to the ESPP of $6.3 million and $0.8 million during 2022 and 2021, respectively. Unrecognized compensation cost related to the ESPP was $4.0 million as of December 31, 2022, with these costs expected to be recognized over a period of 1.0 year through the end of the initial offering period. The impact of forfeitures under the ESPP are recognized as forfeitures occur.

The fair value of purchase rights granted under the ESPP were determined on the date of grant using the following weighted-average assumptions:

Year Ended December 31,	2022		2021
Expected volatility	59.6	%	49.8	%
Expected term (in years)	1.0		1.4
Expected dividend yield	0	%	0	%
Risk-free interest rate	2.8	%	0.4	%

Stock-Based Compensation—The Company recognized stock-based compensation under the Plans and ESPP as follows:

(in millions)
Year Ended December 31,	2022		2021		2020
Research and development	$	12.0	$	6.8	$	3.1
Sales and marketing	12.4		5.8		1.9
General and administrative	10.0		5.3		1.4
Total	$	34.4	$	17.9	$	6.4

In addition, stock-based compensation of $6.3 million, $3.3 million and $1.6 million was capitalized related to software development costs in 2022, 2021 and 2020, respectively.

The Company did not recognize any tax benefit for stock-based compensation arrangements in 2022 or 2021 due to the establishment of a valuation allowance. The Company recognized a tax benefit for stock-based compensation arrangements of $4.7 million in 2020, including an excess tax benefit of $3.7 million.