Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

In March 2014, the Company's board of directors approved the 2014 Equity Incentive Plan, or 2014 Plan, under which stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units and other cash-based or stock-based awards may be granted to employees, consultants and directors. Shares of common stock that are issued and available for issuance under the 2014 Plan consist of authorized, but unissued or reacquired shares of common stock or any combination thereof.

As of December 31, 2020, a total of 13,322 shares had been reserved for issuance under the 2014 Plan. The 2014 Plan contains a provision that automatically increases the shares available for issuance under the plan on January 1 of each year subsequent to the 2014 Plan's adoption through 2024, by an amount equal to the smaller of (a) 4.5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Company's board of directors. On January 1, 2021, 2,500 shares were added to the 2014 Plan in accordance with the annual automatic increase provision of the 2014 Plan. In addition, the 2014 Plan reserve is automatically increased to include any shares issuable upon expiration or termination of options granted under the Company's 2007 Stock Plan, or 2007 Plan, for options that expire or terminate without having been exercised. For the year ended December 31, 2021, no shares have been transferred to the 2014 Plan from the 2007 Plan, and as of December 31, 2021, a total of 15,823 shares were allocated for issuance under the 2014 Plan. As of December 31, 2021, options to purchase a total of 2,706 shares of common stock have been granted under the 2014 Plan, 6,799 shares have been reserved under the 2014 Plan for the vesting of restricted stock units and market stock units, 1,403 shares have been returned to the 2014 Plan as a result of termination of options that expired or terminated without having been exercised and restricted stock awards that terminated prior to the awards vesting, and 7,721 shares of common stock remain available for future issuance under the 2014 Plan.

In July 2007, the Company adopted the 2007 Plan under which options or stock purchase rights may be granted to employees, consultants and directors. Upon the completion of the Company's initial public offering, or IPO, in March 2014, the board of directors terminated the 2007 Plan in connection with the IPO and all shares that were available for future issuance under the 2007 Plan at such time were transferred to the 2014 Plan. The 2007 Plan will continue to govern the terms and conditions of all outstanding equity awards granted under the 2007 Plan. As of December 31, 2021, no shares remain available for future issuance under the 2007 Plan.

Stock-based compensation expense was recorded in the following cost and expense categories in the Company's consolidated statements of comprehensive loss:


	Year Ended December 31,
	2021		2020		2019
Cost of revenues	$	10,590	$	9,888	$	6,427
Sales and marketing	11,153		8,770		7,740
Research and development	13,273		12,869		9,864
General and administrative	19,318		17,708		15,347
Total stock-based compensation expense	$	54,334	$	49,235	$	39,378

Stock Options

The following summarizes the assumptions used for estimating the fair value of stock options granted during the periods indicated, as there were no stock options granted during the years ended December 31, 2021, 2020 or 2019:


						Year Ended December 31, 2018
Risk-free interest rate						2.6%
Expected life (in years)						4.8
Expected volatility						41.0%
Dividend yield						—
Weighted-average grant date fair value per share						$18.14

Stock option activity was as follows:


	Number of Options	Weighted Average Exercise Price
Balance as of January 1, 2019	2,654	$	19.72
Granted	—	—
Exercised	(1,180)	14.15
Forfeited	(55)	39.27
Balance as of December 31, 2019	1,419	23.61
Granted	—	—
Exercised	(720)	19.82
Forfeited	(29)	29.50
Balance as of December 31, 2020	670	27.43
Granted	—	—
Exercised	(307)	19.16
Forfeited	—	—
Balance as of December 31, 2021	363	$	34.42

The summary of stock options outstanding as of December 31, 2021 is as follows:


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
$5.05 - $19.26	7	$	16.85	1.0	7	$	16.85	1.0
$24.33 - $36.50	338	34.28		2.0	338	34.28		2.0
$39.75 - $59.63	18	44.53		2.9	17	44.42		2.9
	363	$	34.42	2.0	362	$	34.40	2.0

The aggregate intrinsic value of stock options exercised during each of the years ended December 31, 2021, 2020 and 2019 was $26.2 million, $53.4 million and $71.0 million, respectively. The total fair value of stock options vested during each of the years ended December 31, 2021, 2020 and 2019 was $0.4 million, $2.4 million and $4.2 million, respectively.

As of December 31, 2021, the aggregate intrinsic value of options outstanding was $16.3 million, the total unrecognized stock-based compensation expense related to stock options was $0.01 million, which the Company expects to recognize over the next 0.2 years.

Restricted Stock Units

The Company's restricted stock units typically vest over a four-year period and upon vesting, the vested shares are issued to the recipient of the restricted stock units.

Restricted stock unit activity was as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of January 1, 2019	1,937	$	43.50
Granted	904	74.75
Vested	(683)	39.10
Forfeited	(206)	49.54
Nonvested as of December 31, 2019	1,952	58.86
Granted	772	82.51
Vested	(752)	54.77
Forfeited	(215)	61.02
Nonvested as of December 31, 2020	1,757	70.74
Granted	786	109.91
Vested	(671)	64.12
Forfeited	(252)	81.89
Nonvested as of December 31, 2021	1,620	$	90.75

Total unrecognized stock-based compensation expense related to restricted stock units was $119.8 million, which the Company expects to recognize over a weighted average period of 2.8 years.

Market Stock Units

In 2018, the Company began granting market stock units to certain executives under the 2014 Plan. The market stock units are performance-based awards that vest based upon the Company's relative stockholder return. For market stock units granted prior to fiscal 2021, the actual number of market stock units that will be eligible to vest is based on the total stockholder return of the Company relative to the total stockholder return of the Index over the three-year performance period. Up to one-third of the target shares of the Company's common stock subject to each market stock unit award are eligible to be earned after the first and second years of the performance period and up to 200% of the full target number of shares subject to each market stock unit award are eligible to be earned after the completion of the three-year performance period (less any shares earned for years one and two) based on the average price of the Company's common stock relative to the Index during the performance period. Beginning March 2021, the actual number of newly granted market stock units that will be eligible to vest is based on the total stockholder return of the Company relative to the total stockholder return of the Index over a two-year and three-year performance period. Up to one-third of the target shares of the Company's common stock subject to each market stock unit award are eligible to be earned after the two-year of the performance period and up to 200% of the full target number of shares subject to each market stock unit award are eligible to be earned after the completion of the three-year performance period (less any shares earned for the two-year performance period) based on the average price of the Company's common stock relative to the Index during the performance period.

Market stock unit activity was as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of January 1, 2019	260	$	21.98
Granted	264	30.31
Vested	(87)	12.76
Forfeited	(3)	26.34
Nonvested as of December 31, 2019	434	28.85
Granted	148	32.85
Vested	(164)	15.71
Forfeited	(48)	33.46
Nonvested as of December 31, 2020	370	35.67
Granted	125	77.63
Change in awards based on performance(1)	206	39.67
Vested	(390)	33.49
Forfeited	(30)	40.19
Nonvested as of December 31, 2021	281	$	59.74

________________________________________________________________________

(1)Represents the change in the number of MSUs earned based on performance achievement for the performance period.

The Company estimates the fair value of market stock units on the date of grant using a Monte Carlo simulation model. The determination of fair value of the market stock units is affected by the Company's and peer firms' stock prices and a number of assumptions including the expected volatilities of the Company's and peer firms' stock and the Index, and its risk-free interest rate. The Company's expected volatility at the date of grant was based on the historical volatilities of its stock and peer firms' stocks and the Index over the performance period. The Company did not estimate a dividend rate or a forfeiture rate for the market stock units due to the limited size, the vesting period and nature of the grantee population and the lack of history of granting this type of award.

Significant assumptions used in the Monte Carlo simulation model for the market stock units granted during the year ended December 31, 2021, 2020, and 2019 are as follows:


	As of December 31,
	2021	2020	2019
Volatility	42.3 - 43.5%	31.3 - 42.8%	30.7 - 31.3%
Risk-free interest rate	0.3 - 1.0%	0.2 - 0.6%	1.6 - 2.4%
Dividend yield	—	—	—
Longest remaining performance period (in years)	3	3	3

Total unrecognized stock-based compensation expense related to market stock units was $9.0 million, which the Company expects to recognize over a weighted average period of 2.0 years.