Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2019

Stock-Based Compensation

Schedule of weighted average grant date fair value

	Year Ended December 31,
	2019		2018		2017
	(In thousands, except per share amounts)
Aggregate intrinsic value of stock options exercised (1)	$	394,998	$	178,504	$	131,955
Total estimated grant date fair value of options vested	$	81,292	$	21,761	$	15,831
Weighted-average grant date fair value per share of options granted	$	58.13	$	18.40	$	13.33

_________

⁽¹⁾ Aggregate intrinsic value represents the difference between the fair value of the Company’s Class A common stock as reported on the New York Stock Exchange and the exercise price of outstanding “in-the-money” options.

Schedule of restricted stock unit activity

	Number of awards outstanding		Weighted- average grant date fair value (Per share)		Aggregate intrinsic value (In thousands)
Nonvested RSUs as of December 31, 2018	8,262,902		$	42.70	$	729,373
Granted	3,413,404		119.04
Assumed in acquisition	561,999		112.88
Vested	(2,893,119	)	51.15
Forfeited and canceled	(854,669	)	$	61.94
Nonvested RSUs as of December 31, 2019	8,490,517		$	74.21	$	830,167

Schedule of valuation assumptions, options

The following assumptions were used in the Monte Carlo simulation model to estimate the grant date fair value and the derived service period of the performance options:

Asset volatility	40%
Equity volatility	45%
Discount rate	14%
Stock price at grant date	$31.7

Schedule of valuation assumptions, ESOP

	Year Ended December 31,
Employee Stock Purchase Plan:	2019	2018	2017
Expected term (in years)	0.49 - 0.50	0.5	0.5
Expected volatility	43.1% - 50.3%	39.8% - 47.5%	33.2% - 33.9%
Risk-free interest rate	1.6% - 2.4%	2.1% - 2.5%	1.1% - 1.4%
Dividend rate	—%	—%	—%

Schedule of stock based compensation expense

The Company recorded the total stock-based compensation expense as follows. In the year ended December 31, 2019, the stock-based compensation expense associated with awards assumed in the SendGrid acquisition was $81.8 million.

	Year Ended December 31,
	2019		2018		2017
	(In thousands)
Cost of revenue	$	7,123	$	1,126	$	650
Research and development	126,012		42,277		22,808
Sales and marketing	60,886		23,616		9,822
General and administrative	70,297		26,254		16,339
Total	$	264,318	$	93,273	$	49,619

Employee and nonemployee stock options

Stock-Based Compensation

Schedule of stock options activity

	Number of options outstanding		Weighted- average exercise price (Per share)		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value (In thousands)
Outstanding options as of December 31, 2018	7,423,369		$	16.07	6.80	$	543,640
Granted	909,229		118.35
Assumed in acquisition	2,978,555		14.91
Exercised	(3,620,866	)	10.43
Forfeited and canceled	(539,439	)	51.28
Outstanding options as of December 31, 2019	7,150,848		$	28.79	6.47	$	511,971
Options vested and exercisable as of December 31, 2019	4,721,801		$	14.00	5.65	$	398,490

Performance-based stock options

Stock-Based Compensation

Schedule of stock options activity

The following table summarizes the details of the performance options:

	Number of options outstanding	Weighted- average exercise price (Per share)		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value (In thousands)
Outstanding options as of December 31, 2018	555,000	$	31.72	6.00	$	—
Granted	—	—
Exercised	—	—
Forfeited and canceled	—	—
Outstanding options as of December 31, 2019	555,000	$	31.72	4.16	$	36,941
Options vested and exercisable as of December 31, 2019	427,812	$	31.72	4.16	$	28,475

Employee stock options

Stock-Based Compensation

Schedule of valuation assumptions, options

The fair value of employee stock options was estimated on the date of grant using the following assumptions in the Black-Scholes option pricing model:

	Year Ended December 31,
Employee Stock Options:	2019	2018	2017
Fair value of common stock	$103.70 - $130.70	$33.01 - $76.63	$23.60 - $31.96
Expected term (in years)	0.33 - 6.08	1.00 - 6.08	6.08
Expected volatility	49.0% - 66.5%	38.6% - 44.2%	44.3% - 47.6%
Risk-free interest rate	1.6% - 2.5%	2.9% - 3.0%	1.9% - 2.3%
Dividend rate	—%	—%	—%