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Stock-Based Compensation
 6 Months Ended
Jun. 30, 2021
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
Plans
The Company’s stock-based compensation program is a long-term retention program that is intended to attract and reward talented employees and align stockholder and employee interests. As of June 30, 2021, the Company had three stock-based compensation plans with shares available for grant.
The Company is currently granting stock-based awards from its Second Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”), which was amended at the Company's Annual Meeting of Stockholders on June 3, 2020. Pursuant to the June 2020 amendment, the maximum number of shares of common stock available for issuance under the 2014 Plan was increased to 51,300,000. In addition, the amendment extended the term of the 2014 Plan to June 3, 2030 and updated the vesting provisions from monthly to annual vesting for annual director awards, consistent with the Company's current compensation program for non-employee directors. As of June 30, 2021, there were 16,075,755 shares of common stock reserved for issuance pursuant to the Company’s stock-based compensation plans, including authorization under its 2014 Plan to grant stock-based awards covering 10,929,297 shares of common stock.
In connection with the Wrike acquisition, on February 26, 2021, the Company's Board of Directors adopted the 2021 Inducement Plan (the “2021 Inducement Plan”). The 2021 Inducement Plan provides for the grant of equity awards to induce highly-qualified prospective officers and employees to accept employment and to provide them with a proprietary interest in the Company. The Company is authorized to issue 320,000 shares of common stock for inducement awards under the 2021 Inducement Plan. During the six months ended June 30, 2021, the Company granted 268,248 non-vested stock units to Wrike employees who joined the Company which vest based on service over a three-year term. As of June 30, 2021, there were 316,032 shares of common stock reserved for issuance pursuant to the 2021 Inducement Plan, including authorization under the 2021 Inducement Plan to grant stock-based awards covering 50,186 shares of common stock.
Effective February 26, 2021, the Company assumed the Wrangler Topco, LLC Second Amended and Restated 2018 Equity Incentive Plan (the “Wrangler Plan”) and the Wrike, Inc, Amended and Restated 2013 Stock Plan (the “Wrike Plan”). As of June 30, 2021, there were 698,658 shares of the Company’s common stock reserved and authorized for issuance under the terms of the Wrangler Plan, including authorization under the Wrangler Plan to grant stock-based awards covering 338,719 shares of common stock. As of June 30, 2021, there were 172,683 shares of the Company's common stock reserved and authorized for issuance under the terms of the Wrike Plan. All of the Wrike Plan awards are currently outstanding with no new shares available for issuance.
Stock-Based Compensation
The detail of the total stock-based compensation recognized by income statement classification is as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
Income Statement Classifications2021202020212020
Cost of subscription, support and services$4,546 $3,404 $8,952 $6,166 
Research and development25,792 30,987 56,919 52,583 
Sales, marketing and services28,649 27,843 56,991 48,229 
General and administrative22,944 23,128 45,931 36,707 
Total$81,931 $85,362 $168,793 $143,685 
Non-vested Stock Units
Service-Based Stock Units
The Company awards senior level employees and certain other employees non-vested stock units granted under the 2014 Plan that vest based on service. These non-vested stock unit awards vest 33.33% on each of the first, second and third anniversary subsequent to the grant date of the award. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. In addition, the Company awards non-vested stock units to all of its continuing non-employee directors, which represent the right to receive one share of the Company's common stock upon vesting. Awards granted to non-employee directors vest in full in one installment on the earlier of: (i) the first anniversary of the award date; or (ii) the day immediately prior to the Company’s next annual meeting of stockholders following the award date.
Unrecognized Compensation Related to Stock Units
As of June 30, 2021, the total number of non-vested stock units outstanding, including company performance awards and service-based awards was 5,426,132. As of June 30, 2021, there was $539.6 million of total unrecognized compensation cost related to non-vested stock units. The unrecognized cost of the awards legally granted through June 30, 2021 is expected to be recognized over a weighted-average period of 1.87 years.
Company Performance Stock Units
On March 1, 2021, the Company awarded senior level employees 305,229 non-vested performance stock unit awards granted under the 2014 Plan. The number of non-vested performance stock units that ultimately vest will be determined within sixty days following completion of the performance period ending December 31, 2023 and will be based on the achievement of specific corporate financial performance goals related to the Company’s Software as a Service (SaaS) annualized recurring revenue (ARR) growth measured during the period from January 1, 2021 to December 31, 2023. The number of non-vested stock units issued will be based on a graduated slope, with the maximum number of non-vested stock units issuable pursuant to the award capped at 200% of the target number of non-vested stock units set forth in the award agreement. Additionally, the awards have an explicit adjustment mechanism to prevent the attainment rates from being distorted should a material acquisition other than Wrike occur during the performance period. The Company is required to estimate the attainment expected to be achieved related to the defined performance goals and the number of non-vested stock units that will ultimately be awarded in order to recognize compensation expense over the vesting period. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. Compensation expense will be recorded through the end of the performance period on December 31, 2023 if it is deemed probable that the performance goals will be met. If the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed.
The Company recorded stock-based compensation costs related to its company performance stock units of $6.4 million and $19.6 million for the three and six months ended June 30, 2021, respectively, and $15.6 million and $17.7 million for the three and six months ended June 30, 2020, respectively.
Assumed stock options
In connection with the acquisition of Wrike, the Company assumed 526,113 outstanding stock options which expire ten years from the date of grant and which were valued using the Black-Scholes option-pricing model. The fair value of the assumed stock options were estimated using the following assumptions:
Six Months Ended
June 30, 2021
Expected volatility factor
0.51 - 0.75
Risk free interest rate
0.04% - 0.14%
Expected dividend yield1.11%
Expected life (in years)
0.08 - 1.00
The Company determined the expected volatility factor by considering the implied volatility in various market-traded options of the Company's common stock based on third-party volatility quotes. The Company's decision to use implied volatility was based upon the availability of actively traded options on the Company's common stock and its assessment that implied volatility is more representative of future stock price trends than historical volatility. The risk-free interest rate was based on a U.S. Treasury instrument whose term is consistent with the expected term of the stock options. The current dividend yield has been updated for expected dividend yield payout. The expected term was based on the average period the stock options are expected to remain outstanding, generally calculated as the midpoint of the stock options’ remaining vesting term and contractual expiration period, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.
The estimated weighted-average grant date fair value for the assumed stock options was $103.22 per share and total fair value of $54.3 million. For the three and six months ended June 30, 2021, the Company recorded stock-based compensation costs related to unvested assumed stock options of $4.5 million and $6.5 million, respectively. As of June 30, 2021, there was $18.8 million of total unrecognized compensation costs related to unvested assumed stock options to be recognized over a weighted-average period of 1.24 years. See Note 6 for detailed information on the Wrike acquisition.