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Equity Awards and Instruments
 9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
Equity Awards and Instruments Equity Awards and Instruments
Stock-Based Compensation Expense
Total stock‑based compensation expense was as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2021202020212020
IPO vested restricted stock and RSU expense$— $15,445 $— $15,445 
Stock option expense773 2,893 2,494 5,849 
Restricted stock and RSUs expense (1)
4,681 2,067 11,139 2,104 
Stock grants expense— — 450 219 
Bonus Plan expense (see Note 11)5,586 — 17,181 — 
DCP elective participant deferrals expense (2) (see Note 12)
173 — 173 — 
ESPP expense (see Note 13)539 — 1,416 — 
Total pre-tax expense (3)
$11,752 $20,405 $32,853 $23,617 
(1)Includes acquisition‑related shares (see Note 4).
(2)DCP elective participant deferrals expense excludes deferred incentive bonus payable pursuant to the Bonus Plan.
(3)As of September 30, 2021 and December 31, 2020, $6,126 and $6,835 remained in Accruals and other current liabilities in the consolidated balance sheets, respectively.
Total stock‑based compensation expense is included in the consolidated statements of operations as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2021202020212020
Cost of subscriptions and licenses$323 $896 $822 $943 
Cost of services235 2,604 685 2,779 
Research and development5,227 6,955 14,069 8,110 
Selling and marketing1,582 5,183 3,885 5,987 
General and administrative4,385 4,767 13,392 5,798 
Total pre-tax expense$11,752 $20,405 $32,853 $23,617 
Stock‑based compensation expense is measured at the grant date fair value of the award and is recognized ratably over the requisite service period, which is generally the vesting period. The Company accounts for forfeitures of equity awards as those forfeitures occur.
The fair value of the common stock during periods prior to the IPO was determined by the board of directors at each award grant date based upon a variety of factors, including the results obtained from independent third‑party valuations, the Company’s financial position, and historical financial performance.
Stock Options
The following is a summary of stock option activity and related information under the Company’s applicable equity incentive plans:
Weighted
WeightedAverage
AverageRemainingAggregate
StockExercise PriceContractualIntrinsic
OptionsPer ShareLife (in years)Value
Outstanding, December 31, 202012,842,226 $4.87 
Exercised(5,262,637)4.35 
Forfeited(243,250)5.53 
Outstanding, September 30, 20217,336,339 $5.23 1.78$406,515 
Exercisable, September 30, 20214,228,714 $4.96 1.47$235,458 
For the nine months ended September 30, 2021 and 2020, the Company received cash proceeds of $5,039 and $7,776, respectively, related to the exercise of stock options. The total intrinsic value of stock options exercised for the nine months ended September 30, 2021 and 2020 was $250,795 and $58,502, respectively.
As of September 30, 2021, there was $3,489 of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of approximately 1.2 years.
Acquisition Options — In addition to stock options granted under the Company’s equity incentive plans, in connection with an acquisition completed in March 2018, the Company issued to certain selling shareholder entities options to acquire an aggregate of up to 900,000 shares of Class B Common Stock. The options have a five‑year term, are exercisable on the fourth anniversary of the closing of the acquisition, and have an initial exercise price of $6.805 per share. The options had a four‑year service condition, which terminated automatically upon the completion of the IPO, and therefore, total stock‑based compensation expense associated with these options was fully recognized as of September 30, 2020. The exercise price of the options is subject to a cap and collar adjustment mechanism that automatically reduces (but not to less than $0.01) or increases the exercise price based on the difference between the exercise price and the fair market value of the Company’s Class B Common Stock on the exercise date. As of September 30, 2021, all options to acquire 900,000 shares remain outstanding. As of September 30, 2021, these options are non‑exercisable and have an aggregate intrinsic value of $7,992.
Restricted Stock and RSUs
Under the equity incentive plans, the Company may grant both time‑based and performance‑based shares of restricted Class B Common Stock and RSUs to eligible colleagues. Time‑based awards generally vest ratably on each of the first four anniversaries of the grant date. Performance‑based awards vesting is determined by the achievement of certain business profitability and growth targets, which include growth in annual recurring revenues, as well as actual bookings for perpetual licenses and non‑recurring services, and certain non‑financial performance targets. Performance targets are set for annual performance periods.
The fair value of restricted stock and RSUs is determined by the product of the number of shares granted and the Company’s common stock price (as described above) on the grant date.
The following is a summary of unvested restricted stock and RSU activity and related information under the Company’s applicable equity incentive plans:
Time-Performance-
BasedBased
Time-Performance-WeightedWeighted
TotalBasedBasedAverageAverage
RestrictedRestrictedRestrictedGrant DateGrant Date
StockStockStockFair ValueFair Value
and RSUsand RSUsand RSUsPer SharePer Share
Unvested, December 31, 20201,423,715 1,263,193 160,522 
(3)
$16.38 $16.62 
Granted693,016 
(1)
593,208 99,808 
(4)
51.2249.93
Vested(332,532)(297,602)(34,930)
(3)
15.30 16.62 
Forfeited(192,999)(64,282)(128,717)20.56 17.43 
Unvested, September 30, 20211,591,200 
(2)
1,494,517 96,683 $30.20 $49.93 
(1)For the nine months ended September 30, 2021, the Company only granted RSUs.
(2)Includes 43,735 RSUs which are expected to be settled in cash.
(3)Relates to the 2020 annual performance period. Total stock‑based compensation expense associated with these awards was fully recognized as of December 31, 2020.
(4)Relates to the 2021 annual performance period.
During the first quarter of 2020, the Company granted 12,454 shares of restricted stock, which were subject to a quarterly time‑based vesting schedule ending March 31, 2021, and had a weighted average grant date fair value of $10.84. During the third quarter of 2020, the Company granted 1,197,760 shares of restricted stock and RSUs, which vest ratably on each of the first four anniversaries of the grant date. During the third quarter of 2020, the Company granted 185,324 shares of restricted stock and RSUs, which are subject to performance-based vesting. During the third quarter of 2020, the Company granted 994,912 shares of restricted stock and RSUs, which vested upon the Company’s completion of the IPO on September 25, 2020. The weighted average grant date fair value of restricted stock and RSUs granted during the third quarter of 2020 was $15.48.
In 2016, the Company granted RSUs subject to performance‑based vesting as determined by the achievement of certain business growth targets. Certain colleagues elected to defer delivery of such shares upon vesting. During the nine months ended September 30, 2021 and 2020, 10,864 and 26,760 shares, respectively, were delivered to colleagues, and 33 and 3,006 additional shares, respectively, were earned as a result of dividends. As of September 30, 2021 and December 31, 2020, 20,209 and 31,040 shares, respectively, of these vested and deferred RSUs remained outstanding.
For the nine months ended September 30, 2021 and 2020, restricted stock and RSUs were issued net of 103,573 and 12,940 shares, respectively, which were sold back to the Company to settle applicable income tax withholdings of $6,352 and $135, respectively.
As of September 30, 2021, there was $41,995 of unrecognized compensation expense related to unvested time‑based restricted stock and RSUs, which is expected to be recognized over a weighted average period of approximately 2.1 years. There was no remaining unrecognized compensation expense related to unvested performance‑based restricted stock. As of September 30, 2021, there was $976 of unrecognized compensation expense related to unvested performance‑based RSUs, which is expected to be recognized over a weighted average period of approximately 0.3 years.
Stock Grants
For the nine months ended September 30, 2021 and 2020, the Company granted 7,824 and 17,411 fully vested shares of Class B Common Stock, respectively, with a fair value of $450 and $219, respectively.
ESPP
In accordance with the guidance in ASC 718-50, Compensation—Stock Compensation, the ability to purchase shares of the Company’s Class B Common Stock for 85% of the lower of the price of the first day of the offering period or the last day of the offering period (i.e., the purchase date) represents an option and, therefore, the ESPP is a compensatory plan under this guidance.
The fair value of each purchase right under the ESPP was calculated as a sum of its components, which includes the discount, a six‑month call option, and a six‑month put option. The call and put options were valued using the Black‑Scholes option pricing model. Stock‑based compensation expense is recognized ratably over the six‑month offering period.
Equity Awards Subsequent to September 30, 2021
In October 2021, the Company granted 199,569 time‑based RSUs with vesting terms of 25% in the fourth quarter of 2021 and the remaining 75% ratably on each of the first three anniversaries of the grant date. The unrecognized compensation expense related to these RSUs is approximately $11,553, which is expected to be recognized over a weighted average period of approximately two years.