Stockholders' Equity

3 Months Ended

Mar. 31, 2021

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

Stockholders’ Equity

Stock Option Plan

In June 2020, the Company's stockholders approved the 2020 Stock Plan, which was adopted by the Company’s Board of Directors in March 2020 subject to stockholder approval. The 2020 Stock Plan is the successor to the 2011 Stock Plan and 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.

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, 2020	21,702,085	18,676,810	$	170.23
Granted	(400,126)	400,126	537.47
Exercised	—	(488,471)	92.45
Expired	—	(4,648)	30.30
Balances as of March 31, 2021	21,301,959	18,583,817	$	180.22
Vested and exercisable as of March 31, 2021		18,583,817	$	180.22

The aggregate intrinsic value of the Company's outstanding stock options as of March 31, 2021 was $6,357 million and represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the first quarter of 2021 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 first quarter of 2021. 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 March 31, 2021 included in the table above was 5.46 years.

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


	Three Months Ended
	March 31, 2021		March 31, 2020
	(in thousands)
Total intrinsic value of options exercised	$	228,020	$	303,226
Cash received from options exercised	48,071		43,694

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
	March 31, 2021			March 31, 2020
Dividend yield	—		%	—		%
Expected volatility	41		%	37		%
Risk-free interest rate	1.08		%	1.71		%
Suboptimal exercise factor	3.81			3.34
Weighted-average fair value (per share)	$	268		$	167
Total stock-based compensation expense (in thousands)	$	107,230		$	97,019
Total income tax impact on provision (in thousands)	$	24,079		$	21,309

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.

Stock Repurchases

In March 2021, the Company’s Board of Directors authorized the repurchase of up to $5 billion of its common stock, with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. The Company is not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price, general economic, business and market conditions, and alternative investment opportunities. The Company may discontinue any repurchases of its common stock at any time without prior notice. As of March 31, 2021, no stock has been repurchased under this program.