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Stock-based Compensation Expense
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Stock-based Compensation Expense
12. Stock-Based Compensation Expense
The Company has three equity incentive plans: its 2004 Incentive Stock Plan (the “2004 Plan”), its 2017 Amended and Restated Equity Incentive Plan (the “2017 Plan”) and its 2020 Equity Incentive Plan (the “2020 Plan”). The Company’s stockholders approved the 2020 Plan in 2020, which became effective in connection with the Company’s March 10, 2021 direct listing of its Class A common stock (the “Direct Listing”). The 2017 Plan was terminated effective immediately prior to the direct listing in connection with the effectiveness of the Company’s 2020 Plan, and accordingly no shares are available for issuance under the 2017 Plan. The 2004 Plan was terminated on the effective date of the 2017 Plan, and accordingly no shares are available for issuance under the 2004 Plan. Any outstanding stock awards under the 2004 Plan and 2017 Plan remain outstanding, subject to the terms of the applicable plan and award agreements, until such shares are issued under those stock awards, by exercise of stock options or settlement of RSUs or until those stock awards become vested or expired by their terms.
Additionally, in 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective in connection with the Direct Listing.
Stock-based compensation expense
Stock-based compensation expense included in the condensed consolidated statements of operations was as follows (in thousands):
 Three Months Ended March 31,
 20242023
Infrastructure and trust & safety$27,275 $18,532 
Research and development173,247 129,257 
General and administrative31,645 30,650 
Sales and marketing8,335 6,465 
Total stock-based compensation expense$240,502 $184,904 
Stock Options
The following table summarizes the Company’s stock option activity (in thousands, except per option data and remaining contractual term):
 Options Outstanding
 Number of
Shares Subject
to Options		Weighted-Average
Exercise
Price (per Option)		Weighted-Average Remaining
Contractual
Term (Years)		Aggregate
Intrinsic
Value
Balances as of December 31, 202340,159 $2.98 5.16$1,716,171 
Granted— — 
Cancelled, forfeited, and expired(77)$4.97 
Exercised(2,594)$3.01 
Balances as of March 31, 202437,488 $2.98 4.92$1,319,654 
Exercisable as of March 31, 2024
36,132 $2.90 4.86$1,274,719 
Vested and expected to vest at March 31, 2024
37,488 $2.98 4.92$1,319,654 
RSUs and RSAs
The following table summarizes the Company’s RSU and RSA activity (in thousands, except per share data):
 RSUsRSAs
 Number of
Shares		Weighted-Average
Grant Date
Fair Value (per Share)		Number of
Shares		Weighted-Average
Grant Date
Fair Value (per Share)
Unvested as of December 31, 202339,846 $42.25 149 $46.00 
Granted4,851 $40.41 — — 
Vested and released(4,834)$43.26 (25)$46.00 
Cancelled(1,106)$41.25 — — 
Unvested as of March 31, 202438,757 $41.92 124 $46.00 
CEO PSUs and RSUs
CEO Long-Term Performance Award
In February 2021, the Leadership Development and Compensation Committee granted a PSU award (the “CEO Long-Term Performance Award”) under the 2017 Plan, which provided our CEO the opportunity to earn a maximum number of 11,500,000 shares of Class A common stock. The CEO Long-Term Performance Award would have vested upon the satisfaction of a service condition and achievement of certain Class A common stock price targets over five years. The Leadership Development and Compensation Committee approved the cancellation of the CEO-Long Term Performance Award on March 1, 2024, as further discussed below. The Class A common stock price targets were not achieved and therefore no shares vested under the CEO Long-Term Performance Award prior to its cancellation.
2024 CEO PSUs and RSUs
On March 1, 2024 (the “Modification Date”), the Leadership Development and Compensation Committee (i) approved the cancellation of the CEO Long-Term Performance Award and (ii) granted Mr. Baszucki a new PSU award (the “2024 CEO PSU Award”) and RSU award (collectively, the “2024 CEO Award”). As of the Modification Date, $84.4 million of stock-based compensation expense remained unrecognized related to the CEO Long-Term Performance Award.
The Company determined that the concurrent cancellation of the CEO Long-Term Performance Award and granting of the 2024 CEO Award represented a modification of the CEO Long-Term Performance Award. As of the Modification Date, total subsequent stock-based compensation expense to be recognized was measured as (i) the remaining unrecognized stock-based compensation expense related to the grant date fair value of the CEO Long-Term Performance Award and (ii) the incremental fair value resulting from the modification, if any. To estimate the incremental fair value resulting from the modification (if any), the Company first estimated the fair value of the modified CEO Long-Term Performance Award immediately prior to the Modification Date using a model based on multiple stock price outcomes developed through the use of a Monte Carlo simulation that incorporated into the valuation the possibility that the stock price targets may not be satisfied. A Monte Carlo simulation model requires the use of various assumptions, including the underlying stock price, volatility, and the risk-free interest rate as of the valuation date, corresponding to the length of time remaining in the performance period, and expected dividend yield. On the Modification Date, the estimated fair value of the CEO Long-Term Performance Award immediately prior to the modification was greater than the estimated fair value of the 2024 CEO Award (which was generally estimated based on the Modification Date fair value of the Class A common stock underlying the 2024 CEO Award, with consideration of the probability of achievement against the pre-established performance measures). As a result, the modification did not result in any incremental stock-based compensation expense. As of the Modification Date, total subsequent stock-based compensation expense to be recognized totaled $84.4 million. Of the total estimated stock-based compensation expense, 75% of the value was allocated to the 2024 CEO PSU Award with the remaining 25% allocated to the RSUs, based on the relative value of the two awards on the Modification Date.
Under the 2024 CEO PSU Award, the number of shares that can be earned will range from 0% to 200% of the target number of shares based on the Company’s performance against two independent performance measures relative to pre-established thresholds during a two-year performance period ending on December 31, 2025. The two independent performance measures include the Company’s cumulative (i) bookings during the performance period, as defined in the grant agreement with the CEO and (ii) Adjusted EBITDA during the performance period, which correlates to the covenant adjusted EBITDA calculation used in certain covenant calculations specified in the indenture governing our 2030 Notes (the “PSU Adjusted EBITDA”). Further, the awards are subject to Mr. Baszucki’s continuous service with the Company through each vesting date, with the initial vesting date to occur in the first quarter of 2026 (of which 67% of the award earned, if any, will vest) and the remaining vesting dates to occur in four equal quarterly installments beginning in the second quarter of 2026. The Company will recognize stock-based compensation expense for the 2024 CEO PSU Award on an accelerated attribution method over the requisite service period of each separately vesting tranche. Actual performance against the pre-established threshold under the 2024 CEO PSU Award will have no impact on the subsequent stock-based compensation expense recognized.
The target number of the 2024 CEO PSU Award was 446,534 in aggregate, with 80% of the target number of shares allocated to the cumulative bookings performance measure and 20% of the target number of shares allocated to the cumulative PSU Adjusted EBITDA performance measure.
The Company recorded $10.5 million of stock-based compensation expense, in total, within general and administrative expenses related to the 2024 CEO PSU Award and CEO Long-Term Performance Award during the three months ended March 31, 2024 and $12.0 million of stock-based compensation expense within general and administrative expenses related to the CEO Long-Term Performance Award during the three months ended March 31, 2023.
The number of RSUs granted under the 2024 CEO Award totaled 148,844 and the RSUs will vest quarterly over a three-year service period beginning March 1, 2024, subject to Mr. Baszucki’s continued service with the Company on each vesting date.
Other PSUs
2024 Executive PSU Awards
During the first quarter of 2024, the Leadership Development and Compensation Committee granted PSU awards to certain members of management (the “2024 Executive PSU Awards”). The vesting requirements, performance metrics, and performance period of the 2024 Executive PSU Awards are consistent with those of the 2024 CEO PSU Award.
The target number of 2024 Executive PSU Awards was 353,241 in total, with 80% of the target number of shares allocated to the cumulative bookings performance measure and 20% of the target number of shares allocated to the cumulative PSU Adjusted EBITDA performance measure.
The Company recognizes stock-based compensation expense for the 2024 Executive PSU Awards based upon the per-share grant date fair value of $41.32 on an accelerated attribution method over the requisite service period of each separately vesting tranche. At each reporting period, the amount of stock-based compensation is determined based on the probability of achievement against the pre-established performance measures and if necessary, a cumulative catch-up adjustment is recorded to reflect any revised estimates regarding the probability of achievement.
During the three months ended March 31, 2024, no stock-based compensation expense was recorded related to the 2024 Executive PSU Awards.
2023 PSU Awards
During the second quarter of 2023, the Leadership Development and Compensation Committee granted PSU awards to certain members of management (the “2023 PSU Awards”). The number of shares that can be earned will range from 0% to 200% of the target number of shares, based on the Company’s performance against two independent performance measures relative to pre-established thresholds during a two-year performance period ending on December 31, 2024. The two independent performance measures include the Company’s cumulative (i) bookings during the performance period, as defined in the respective grant agreements with each employee and (ii) PSU Adjusted EBITDA during the performance period. Further, the awards are subject to continuous employment, with the first vesting to occur in the first quarter of 2025 (in which 50% of any awards earned will vest) and the second vesting to occur in the second quarter of 2026 (in which the remaining 50% of any awards earned will vest).
As of March 31, 2024, the number of shares under the 2023 PSU Awards that can be earned at target performance totaled 277,631, with 80% of the target number of shares allocated to the cumulative bookings performance measure and 20% of the target number of shares allocated to the cumulative PSU Adjusted EBITDA performance measure.
The Company recognizes stock-based compensation expense for the 2023 PSU Awards based upon the per-share grant date fair value of $45.70 on an accelerated attribution method over the requisite service period of each separately vesting tranche. At each reporting period, the amount of stock-based compensation is determined based on the probability of achievement against the pre-established performance measures and if necessary, a cumulative catch-up adjustment is recorded to reflect any revised estimates regarding the probability of achievement.
During the three months ended March 31, 2024, the Company recorded a net stock-based compensation benefit of $0.7 million related to the 2023 PSU Awards.
2022 PSU Awards
During the second quarter of 2022, the Leadership Development and Compensation Committee granted PSU awards to certain members of management (the “2022 PSU Awards”). On the grant date, the target number of 2022 PSU Awards was 207,284. The number of shares that can be earned will range from 0% to 200% of the target number of shares, based on the Company’s stock price performance and achievement of certain stock price hurdles during the last quarter of the second year through the end of the third year of a three-year performance period (the “2022 PSU Awards Stock Price Hurdles”) and subject to continuous employment through such date.
The Company estimated the grant date fair value of the 2022 PSU Awards using a model based on multiple stock price outcomes developed through the use of a Monte Carlo simulation which incorporates into the valuation the possibility that the 2022 PSU Awards Stock Price Hurdles may not be satisfied. The grant date fair value of the 2022 PSU Awards was estimated to be $43.13 per share, and the Company estimates that it will recognize total stock-based compensation expense of approximately $7.5 million using the accelerated attribution method over the derived service period of each tranche which is equal to five measurement periods commencing with the last quarter of the second year and ending with the last quarter of the third year. If the 2022 PSU Awards Stock Price Hurdles are met sooner than the derived service period, the stock-based compensation expense will be adjusted to reflect the cumulative expense associated with the vested award. Stock-based compensation expense will be recognized over the requisite service period if the members of management continue to provide service to the Company, regardless of whether the 2022 PSU Awards Stock Price Hurdles are achieved.
The Company recorded $0.7 million and $1.0 million of stock-based compensation expense related to the 2022 PSU Awards during the three months ended March 31, 2024 and March 31, 2023, respectively.
Employee Stock Purchase Plan
The Company recorded $6.5 million and $7.1 million of stock-based compensation expense related to the 2020 ESPP during the three months ended March 31, 2024 and March 31, 2023, respectively.