Stock-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

2021 Stock Option and Incentive Plan

At the Company’s special meeting of stockholders held on June 2, 2021, the stockholders approved the 2021 Stock Option and Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan (“2021 ESPP”) to encourage and enable the current and future officers, employees, directors, and consultants of the Company and its affiliates to obtain ownership in the Company. The aggregate number of shares authorized for issuance under the 2021 Plan will not exceed 52.0 million shares of stock. The aggregate number of shares authorized for issuance under the 2021 ESPP will not exceed 4.7 million, plus on January 1, 2022, and each January 1 thereafter through January 1, 2031 the number of shares of Class A common stock reserved and available for issuance under the 2021 ESPP shall be cumulatively increased by the lessor of (i) 15.0 million shares of Class A common stock, (ii) one percent 1.0% of the number of shares of Class A common stock issued and outstanding on the immediately preceding December 31st, or (iii) such lesser number of shares determined by the administrator appointed by the Board of Directors.

The 2021 Plan provides for the grant of incentive and nonqualified stock option, restricted stock units (“RSUs”), restricted share awards, stock appreciation awards, unrestricted stock awards, and cash-based awards to employees, directors, and consultants of the Company.

Stock Options

On June 3, 2021, in connection with the closing of the Business Combination, the Company granted 12.8 million stock options with market conditions (“Market Condition Awards”) to several executive officers and directors of the Company. The Market Condition Awards are eligible to vest when the Company’s stock price meets specified hurdle prices and stays above those prices for 20 consecutive days after June 3, 2021 and before June 3, 2024 (i.e., the period from grant to the end date of the performance period). Once the market condition is satisfied, the applicable percentage of the Market Condition Awards will vest 50% on each of the first and second anniversaries so long as the optionee stays employed. The unrecognized compensation cost of the Market Condition Awards as of June 30, 2022 was $31.4 million, which is expected to be recognized over the weighted average remaining service period of 2.0 years.

Further, on March 15, 2022, in connection with certain performance metrics, the Company granted 0.4 million stock options with service conditions ("Service Condition Awards") to several executive officers of the Company. The Service Conditions Awards vest over four years, with 25% of the shares underlying the award vesting on March 15, 2023, and 25% of the shares underlying the award at the end of each successive one-year period thereafter so long as the optionee stays employed. The unrecognized compensation cost of the Service Condition Awards as of June 30, 2022 was $1.5 million, which is expected to be recognized over the weighted average remaining service period of 2.2 years.

Stock Option Valuation

The Company uses two valuation methods to determine the fair value of the stock options. The Monte-Carlo simulation model is used to estimate the fair value of the Market Condition Awards. The Monte-Carlo simulation model calculates multiple potential outcomes for an award and establishes a fair value based on the most likely outcome. For further information regarding the key assumptions, refer to Note 14, "Stock-Based Compensation" on the Company's Form 10-K for the fiscal year ended December 31, 2021.

The Black-Scholes valuation method is used to determine the fair value of the Service Condition Awards. The Black-Scholes valuation model requires the input of assumptions regarding the expected term, expected volatility, dividend yield and risk-free interest to estimate the fair value of the stock option. The fair values of the Service Condition Awards were calculated using the following assumptions as of the grant date on March 15, 2022:


		As of March 15, 2022

Strike price	$	6.03
Risk-free interest rate		2.1%
Expected volatility		70.0%
Expected dividend yield		0.0%
Expected term		6.25

A summary of the status of unvested options granted under the 2021 Plan through June 30, 2022 is presented below:


	Market-Based Stock Options			Service-Based Stock Options
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Balance, December 31, 2020	—	—		—	—
Granted	12,806,407	$	4.23	—	—
Vested	—	—		—	—
Forfeitures	—	—		—	—
Balance, June 30, 2021	12,806,407	$	4.23		—

Balance, December 31, 2021	12,703,698	$	4.23	—	—
Granted	—	—		435,141	$	3.88
Vested	—	—		—	—
Forfeitures	(262,146)	4.23		—	—
Balance, June 30, 2022	12,441,552	$	4.23	435,141	$	3.88

Restricted Stock Units

The fair value of RSUs is based on the closing price of the Company’s Class A common stock on the grant date. The unrecognized compensation cost of the RSUs as of June 30, 2022 was $96.7 million for service based awards and $4.0 million for performance based awards, which are expected to be recognized over the weighted average remaining service period of 1.7 years and 1.4 years, respectively. A majority of RSUs vest in equal annual installments over a period of four years from the date of grant. Certain executives of the Company received RSUs which vest over a period of two years in equal annual installments. Further, RSUs granted to non-employee members of the Board of Directors vest over the lesser of one year or upon the next annual shareholder meeting.

A summary of the status of unvested RSUs granted under the 2021 Plan through June 30, 2022 is presented below:


	Restricted-Stock Units			Performance - Restricted-Stock Units
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Balance, December 31, 2020	—	—		—	—
Granted	2,216,501	$	14.75	373,971	$	13.37
Vested	—	—		—	—
Forfeitures	—	—		—	—
Balance, June 30, 2021	2,216,501	$	14.75	373,971	$	13.37

Balance, December 31, 2021	4,460,772	$	14.43	706,750	$	12.73
Granted	11,326,599	5.38		—	—
Vested	(717,138)	12.44		(93,493)	13.37
Forfeitures	(293,538)	7.62		—	—
Balance, June 30, 2022	14,776,695	$	7.73	613,257	$	12.63

The Company recorded compensation expenses related to stock options and RSUs of $17.4 million and $3.6 million for the three months ended June 30, 2022 and 2021, respectively, $30.6 million and $3.7 million for the six months ended June 30, 2022 and 2021, respectively. The Company recorded compensation expense related to the ESPP of $0.4 million and $1.0 million for the three and six months ended June 30, 2022.

The total stock-based compensation expense related to all the stock-based awards granted by the Company is reported in the consolidated statement of operations as compensation expense within the selling, general and administrative expense caption.