Stock-Based Compensation

3 Months Ended

Sep. 30, 2021

Stock-Based Compensation

Stock-Based Compensation

(9)  Stock-Based Compensation

The Company maintains a 2008 Equity Incentive Plan (the “2008 Plan”) and a 2014 Equity Incentive Plan (the “2014 Plan”) pursuant to which the Company has reserved shares of its common stock for issuance to its employees, directors and non-employee third parties. The 2014 Plan serves as the successor to the 2008 Plan and permits the granting of restricted stock units and other equity incentives at the discretion of the compensation committee of the Company’s board of directors. No new awards have been or will be issued under the 2008 Plan since the effective date of the 2014 Plan. Outstanding awards under the 2008 Plan continue to be subject to the terms and conditions of the 2008 Plan. The number of shares of common stock reserved for issuance under the 2014 Plan may increase each calendar year, continuing through and including January 1, 2024. The number of shares added each year may be equal to the lesser of (a) four and five tenths percent (4.5%) of the number of shares of common stock of the Company issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Company’s board of directors.

As of September 30, 2021, the Company had 12,053 shares allocated to the plans, of which 2,052 shares were subject to outstanding options or awards. Generally, the Company issues previously unissued shares for the exercise of stock options or vesting of awards; however, shares previously subject to 2014 Plan grants or awards that are forfeited or net settled at exercise or release may be reissued to satisfy future issuances.

The following table summarizes changes in the number of shares available for grant under the Company’s equity incentive plans during the three months ended September 30, 2021:

	Number of Shares
Available for grant at July 1, 2021	10,312
RSUs granted	(523)
MSUs granted	(44)
Shares withheld in settlement of taxes and/or exercise price	250
Forfeitures	51
Shares removed	(45)
Available for grant at September 30, 2021	10,001

Shares removed represents forfeitures of shares and shares withheld in settlement of taxes and/or payment of exercise price related to grants made under the 2008 Plan. As noted above, no new awards will be issued under the 2008 Plan.

Stock-based compensation expense related to restricted stock units (“RSUs”), market share units (“MSUs”) and the Employee Stock Purchase Plan is included in the following line items in the accompanying unaudited consolidated statements of operations and comprehensive income:

	Three Months Ended September 30,
	2020		2021
Cost of revenues	$	1,832	$	2,607
Sales and marketing		3,880		5,159
Research and development		2,230		3,702
General and administrative		6,335		8,091
Total stock-based compensation expense	$	14,277	$	19,559

In addition, the Company capitalized $769 and $1,547 of stock-based compensation expense in its capitalized internal-use software costs in the three months ended September 30, 2020 and 2021, respectively.

In August 2020, the compensation committee of the Company’s board of directors approved the modification of the performance targets for vesting of the performance-based restricted stock units granted in fiscal 2020. The Company recorded $860 and $1,243 in stock-based compensation expense during the three months ended September 30, 2020 and 2021, respectively, related to these modified performance-based restricted stock units.

There were no stock options granted during the three months ended September 30, 2020 or 2021. The table below presents stock option activity during the three months ended September 30, 2021:

	Outstanding Options
				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term (years)	value
Balance at July 1, 2021	765	$	16.06	2.4	$	133,550
Options exercised	(151)	$	9.46
Balance at September 30, 2021	614	$	17.69	2.3	$	161,112
Options vested and exercisable at September 30, 2021	614	$	17.69	2.3	$	161,112

The total intrinsic value of options exercised was $11,408 and $35,868 during the three months ended September 30, 2020 and 2021.

The Company grants RSUs under the 2014 Plan with terms determined at the discretion of the compensation committee of the Company’s board of directors. RSUs generally vest over three or four years following the grant date. Certain RSU awards have time-based vesting conditions while other RSUs vest based on the achievement of certain revenue growth and/or Adjusted EBITDA margin targets. For these performance-based RSUs, the Company recognizes stock-based compensation expense based upon the probable or actual achievement of these aforementioned performance metrics.

The following table represents restricted stock unit activity during the three months ended September 30, 2021:

	Units	Weighted average grant date fair value
RSU balance at July 1, 2021	1,388	$	100.33
RSUs granted	523	$	250.22
RSUs vested	(524)	$	83.27
RSUs forfeited	(46)	$	135.51
RSU balance at September 30, 2021	1,341	$	164.71
RSUs expected to vest at September 30, 2021	1,226	$	162.92

At September 30, 2021, there was $148,712 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units granted. That cost is expected to be recognized over a weighted average period of 2.2 years.

The Company also grants MSUs under the 2014 Plan with terms determined at the discretion of the Committee. The actual number of MSUs that will be eligible to vest is based on the achievement of a relative total shareholder return (“TSR”) target as compared to the TSR realized by each of the companies comprising the Russell 3000 Index over an approximately three-year period. The MSUs cliff-vest at the end of the TSR measurement period, and up to 200% of the target number of shares subject to each MSU are eligible to be earned.

The following table represents market share unit activity during the three months ended September 30, 2021:

	Units	Weighted average grant date fair value
MSU balance at July 1, 2021	58	$	178.04
MSUs granted	44	$	355.60
MSUs forfeited	(5)	$	178.04
MSU balance at September 30, 2021	97	$	257.87

The Company estimated the grant date fair value of the MSUs using a Monte Carlo simulation model that included the following assumptions:

	Three Months Ended
	September 30,
	2020		2021
Valuation assumptions:
Expected dividend yield	—	%	—	%
Expected volatility	52.0	%	47.5	%
Expected term (years)	3.04		3.04
Risk‑free interest rate	0.18	%	0.43	%

At September 30, 2021, there was $18,240 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested MSUs. That cost is expected to be recognized over a period of 2.6 years.