Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Stockholders' Equity and Stock-based Compensation Disclosure [Abstract]

Stockholders’ Equity

Stock Option Plan

On June 4, 2020, the Company's stockholders approved the 2020 Stock Plan, which was adopted by the Company’s Board of Directors on March 4, 2020 subject to stockholder approval. The 2020 Stock Plan is the successor to the 2011 Stock Plan. The 2020 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. The 2020 Stock plan authorized 17,500,000 new shares to be available for award grants. As of the date the 2020 Stock Plan was adopted by the Company's Board of Directors, 5,530,106 shares were available to be granted under the 2011 Stock Plan. These shares are available for award grants under the 2020 Stock Plan.

A summary of the activities related to the Company’s stock option plans is as follows:



			Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price (per share)
Balances as of December 31, 2019	6,111,561		20,859,326		$	124.28
New Shares Authorized	17,500,000		—		—
Granted	(1,498,232	)	1,498,232		412.45
Exercised	—		(2,988,359	)	67.58
Expired	—		(188	)	13.38
Balances as of September 30, 2020	22,113,329		19,369,011		$	155.32
Vested and exercisable as of September 30, 2020			19,369,011		$	155.32

The aggregate intrinsic value of the Company's outstanding stock options as of September 30, 2020 was $6,684 million and represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of 2020 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of the third quarter of 2020. This amount changes based on the fair market value of the Company’s common stock. The weighted-average remaining contractual term of the Company's outstanding stock options as of September 30, 2020 included in the table above was 5.47 years.

A summary of the amounts related to option exercises, is as follows:



	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
	(in thousands)
Total intrinsic value of options exercised	$	321,859	$	119,439	$	1,067,241	$	513,213
Cash received from options exercised	68,665		11,989		201,419		56,857

Stock-based Compensation

Stock options granted are exercisable for the full ten year contractual term regardless of employment status. The following table summarizes the assumptions used to value option grants using the lattice-binomial model and the valuation data:



	Three Months Ended						Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Dividend yield	—		%	—		%	—		%	—		%
Expected volatility	45		%	38		%	37% - 45%			38% - 41%
Risk-free interest rate	0.67		%	1.92		%	0.67% - 1.71%			1.92% - 2.74%
Suboptimal exercise factor	3.62			3.19			3.34 - 3.62			3.07 - 3.19
Weighted-average fair value (per share)	$	264		$	154		$	205		$	165
Total stock-based compensation expense (in thousands)	$	106,357		$	100,262		$	307,586		$	305,310
Total income tax impact on provision (in thousands)	$	24,292		$	22,679		$	68,435		$	69,152

The Company considers several factors in determining the suboptimal exercise factor, including the historical and estimated option exercise behavior.

The Company calculates expected volatility based solely on implied volatility. The Company believes that implied volatility of publicly traded options in its common stock is more reflective of market conditions, and given consistently high trade volumes of the options, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock.

In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date.