Stockholders' Equity

12 Months Ended

Dec. 31, 2019

Redeemable Convertible Preferred Stock

Immediately prior to the closing of the Company's IPO, 41,628,207 shares of outstanding redeemable convertible preferred stock converted into 42,188,624 shares of Class B common stock (including additional shares issuable upon conversion of the Company's Series G redeemable convertible preferred stock based on the IPO price of $23.00 per share). Further, outstanding warrants to purchase 933,269 shares of the Company's Series G redeemable convertible preferred stock automatically exercised into 997,193 shares of Class B common stock based on the IPO price of $23.00 per share.

Common Stock

2004 and 2010 Stock Option Plans

In 2004, the board of directors and stockholders of the Company authorized and ratified the 2004 Stock Plan (2004 Plan), as amended. The 2004 Plan allows for the issuance of incentive stock options (ISOs), non-statutory stock options (NSOs) and stock purchase rights. The 2004 Plan states the maximum aggregate number of shares that may be subject to options or stock purchase rights and sold under the plan is 6,000,000 shares.

In 2010, the board of directors and stockholders of the Company authorized and ratified the 2010 Stock Plan (2010 Plan), as amended. The 2010 Plan allows for the issuance of ISOs, NSOs and stock purchase rights. The 2010 Plan states the maximum aggregate number of shares that may be subject to options or stock purchase rights and sold under the plan is 30,663,761 shares.

2018 Stock Option and Incentive plan

In August 2018, the 2018 Stock Option and Incentive Plan (2018 Plan) was adopted by the board of directors and approved by the stockholders and became effective in connection with the IPO. The 2018 Plan replaces the 2010 Plan as the board of directors has determined not to make additional awards under the 2010 Plan. The 2010 Plan will continue to govern outstanding equity awards granted thereunder. The Company initially reserved 7,672,600 shares of Class A common stock for the issuance of awards under the 2018 Plan and 5,956,644 shares of Class A common stock were reserved as of December 31, 2019.

The Company has two classes of common stock, Class A and Class B. Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share. The Company’s common stock has no preferences or privileges and is not redeemable. Holders of Class A and Class B common stock are entitled to dividends, if and when declared, by the Company’s board of directors. The 2018 Plan allows for the granting of options, stock appreciation rights, restricted stock, restricted stock units (RSUs), unrestricted stock awards, dividend equivalent rights and cash-based awards. Every January 1, the number of shares of stock reserved and available for issuance under the 2018 Plan will cumulatively increase by five percent of the number of shares of Class A and Class B common stock outstanding on the immediately preceding December 31, or a lesser number of shares as approved by the board of directors.

As of December 31, 2019, there were 15,684,021 options issued and outstanding under the 2004 Plan, 2010 Plan and 2018 Plan (collectively, the Plans) and 11,196,350 shares available for issuance under the 2018 Plan. The Company no longer grants awards under the 2004 Plan or the 2010 Plan.

Stock options granted typically vest over a four-year period from the date of grant. Options awarded under the Plans may be granted at an exercise price per share not less than the fair value at the date of grant and are exercisable up to ten years.

Stock option activity under the Plans is as follows:


	Outstanding options	Weighted- average exercise price		Weighted- average remaining contractual term (years)	Aggregate intrinsic value (thousands)
Balance as of December 31, 2017	18,701,267	$	5.73	7.3	$	29,728
Granted	6,824,057	12.68
Exercised	(1,727,899)	4.69			16,816
Cancelled	(1,784,828)	7.19
Balance as of December 31, 2018	22,012,597	7.85		7.1	439,382
Granted	1,790,074	17.71
Exercised	(6,465,360)	6.32			87,544
Cancelled	(1,653,290)	10.88
Balance as of December 31, 2019	15,684,021	9.28		6.3	170,847
Vested and exercisable as of December 31, 2018	12,462,693	5.75		5.6	274,883
Vested and expected to vest as of December 31, 2018	20,926,797	7.69		7.0	421,047
Vested and exercisable as of December 31, 2019	9,913,182	7.14		5.1	129,341
Vested and expected to vest as of December 31, 2019	15,197,994	9.16		6.3	167,439

2018 Employee Stock Purchase plan

In August 2018, the board of directors adopted, and stockholders approved, the 2018 Employee Stock Purchase Plan (ESPP). A total of 1,534,500 shares of the Company’s Class A common stock were initially authorized for issuance under the 2018 ESPP. In March 2019, the board of directors approved the reservation of an additional 783,583 shares of Class A common stock for a total of 2,318,083 shares reserved for issuance under the ESPP. Subject to any plan limitations, the 2018 ESPP allows eligible employees to contribute, through payroll deductions, up to 15% of their earnings for the purchase of the Company’s Class A common stock at a discounted price per share. Except for the initial offering period, the ESPP provides for separate six-month offering periods. Unless otherwise determined by the board of directors, the Company’s Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per share that is the lesser of (1) 85% of the fair market value of the Company’s Class A common stock on the first trading day of the offering period, which for the initial offering period is the price at which shares of the Company’s Class A common stock were first sold to the public, or (2) 85% of the fair market value of the Company’s Class A common stock on the last trading day of the offering period.

A total of 271,294 shares were purchased under the ESPP during the year ended December 31, 2019, and as of that date, 2,046,789 shares of Class A common stock were available for future issuance under the ESPP. No shares of Class A common stock were purchased under the ESPP during the year ended December 31, 2018.

The Company recorded $1.2 million and $0.4 million of stock-based compensation expense related to the ESPP during the years ended December 31, 2019 and 2018, respectively.

Common Stock Subject to Repurchase

The 2010 Plan and the Company’s stock option agreement allow for the early exercise of stock options for certain individuals, as determined by the board of directors. Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability. Upon termination of service, the Company may, at its discretion, repurchase unvested shares acquired through early exercise of stock options at a price equal to the price per share paid upon the exercise of such options. The Company includes unvested shares subject to repurchase in the number of shares of common stock outstanding.

At December 31, 2019 and December 31, 2018, outstanding common stock included 18,665 and 55,537 shares, respectively, subject to repurchase related to stock options early exercised and unvested. The Company had a liability of $0.2 million and $0.4 million as of December 31, 2019 and 2018, respectively, related to early exercises of stock options. The liability is reclassified into stockholders’ equity as the awards vest.

Stock-based Compensation Expense

All stock-based awards to employees and members of the Company’s board of directors are measured based on the grant date fair value of the awards and recognized in the consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (the vesting period of the award). The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model and records stock-based compensation expense for service-based equity awards using the straight-line attribution method.

The following range of assumptions were used to estimate the fair value of stock options granted to employees:


	Year Ended December 31,
	2019	2018	2017
Expected dividend yield	—	—	—
Expected volatility	48.8 - 49.7%	43.5 - 48.2%	40.7 - 57.1%
Risk-free interest rate	1.32 - 2.58%	2.96 - 3.09%	1.92 - 2.1%
Expected term (years)	5.04 - 6.08	5.28 - 6.08	5.02 - 6.08

The weighted-average fair value of stock options granted was $8.57, $8.16 and $3.25 for the year ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019 and 2018, the total unrecognized stock-based compensation related to unvested options outstanding was $38.2 million and $51.3 million, respectively, to be recognized over a weighted-average period of 2.39 years and 2.73 years, respectively.

The following range of assumptions were used to estimate the purchase rights granted under the ESPP on the first day of the offering period:


			Year Ended
			December 31, 2019
Expected dividend yield			—
Expected volatility			43.26 - 58.89%
Risk-free interest rate			1.62 - 2.31%
Expected term (years)			0.5

Restricted Stock Units

Restricted stock activity for the year ended December 31, 2019 is presented as follows:


	Outstanding RSUs and RSAs	Weighted-average grant date fair value per share		Weighted- average remaining contractual term (years)	Aggregate intrinsic value (thousands)
Balance at December 31, 2017	802,900	$	8.65
Awarded	686,072	16.09
Released	(809,567)
Cancelled	(8,799)	31.79
Balance at December 31, 2018	670,606	24.71
Awarded	4,055,344	20.38
Released	(437,844)	21.16
Cancelled	(490,587)	25.21
Balance at December 31, 2019	3,797,519	20.44		1.8	$	76,596
Vested and expected to vest as of December 31, 2019	3,126,182	20.46		1.6	63,055
Vested and expected to vest as of December 31, 2018	532,623	24.80		1.7	14,812

The Company recognized $14.2 million of stock-based compensation expense related to RSUs during the year ended December 31, 2019, and, as of that date, the total unrecognized stock-based compensation related to RSUs outstanding was $57.3 million, which will be recognized over a weighted-average period of 3.41 years.

The Company completed its IPO in September 2018 and satisfied the performance condition for all then outstanding RSU awards. The Company recognized $6.9 million of stock-based compensation expense, based on the grant date fair value of a single performance-based award, which is included in general and administrative expenses for the year ended December 31, 2018.

Sales of the Company’s Stock

In May 2018, employees and former employees of the Company sold an aggregate of 1.3 million shares of the Company’s common stock to entities affiliated with an existing investor at a purchase price of $13.12 per share, for an aggregate purchase price of $17.2 million. The purchase price was in excess of the fair value of such shares. As a result, during the year ended December 31, 2018, the Company recorded the excess of the purchase price above fair value of $2.2 million as compensation expense.