In December 2020, the Company's amended and restated certificate of incorporation became effective, which authorizes the issuance of 700,000,000 shares of common stock with a par value of $0.0001 per share. Shares of common stock reserved for issuance, on an as-converted basis, are as follows:


	December 31,	March 31,
	2022	2023
Options issued and outstanding	12,547,010	13,929,917
RSUs outstanding	6,046,796	8,222,931
PRSUs outstanding	687,500	—
Shares available for future issuance under 2020 plan	5,842,057	6,004,507
Shares available for issuance under ESPP	2,543,089	3,043,551
Total	27,666,452	31,200,906

In February 2022, the Board of Directors authorized the Company to purchase up to $400.0 million of common stock of the Company. The Company may repurchase shares from time to time through open market

purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1. The repurchase program does not obligate the Company to acquire any particular amount of its common stock, and may be suspended or terminated by the Company at any time at its discretion without prior notice.

The Company records share repurchases on the settlement date. Repurchased shares are subsequently retired and returned to the status of authorized but unissued. The Company’s policy for share retirements is to allocate the excess between par value and the repurchase price, including costs and fees, to additional paid-in capital. During the three months ended March 31, 2023, the Company made no repurchases of common stock. As of March 31, 2023, $222.1 million remains available for future purchases of our common stock under the share repurchase program.


	Number of Options	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Balances at December 31, 2022	12,547,010	$	14.65	6.6	$	77,289

Options granted	2,065,794	15.23
Options exercised	(331,093)	4.64
Options cancelled and forfeited	(351,794)	18.81
Balances at March 31, 2023	13,929,917	14.87		6.8	96,888
Options exercisable – March 31, 2023	8,251,381	6.94		5.1	88,402
Options vested and expected to vest – March 31, 2023	13,881,292	$	14.81	6.8	$	96,844

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the fair value of the Company’s stock as of March 31, 2023. The aggregate intrinsic value of options exercised for the three months ended March 31, 2022 and 2023 was $105.2 million and $4.0 million respectively. The weighted-average grant date fair value of options granted during the three months ended March 31, 2022 and 2023 was $63.78 and $8.00 per share, respectively. The total fair value of options vested for the three months ended March 31, 2022 and 2023 was $6.7 million and $9.5 million respectively.

As of March 31, 2023, total unrecognized stock-based compensation expense related to unvested stock options was $65.4 million, which is expected to be recognized over a remaining weighted-average period of 3.0 years.

The Company grants RSUs to employees and nonemployees. RSUs vest upon satisfaction of a service-based condition, which is generally satisfied over one to four years. The following table summarizes RSU activity for the three months ended March 31, 2023:


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Unvested at December 31, 2022	6,046,796	$	51.28
RSUs granted	3,409,843	17.44
RSUs vested	(698,173)	42.10
RSUs cancelled and forfeited	(535,535)	74.43
Unvested at March 31, 2023	8,222,931	$	36.52

As of March 31, 2023, total unrecognized stock-based compensation expense related to outstanding unvested RSUs was $253.6 million, which is expected to be recognized over a remaining weighted-average period of 2.6 years.

In connection with the Prodigy Software, Inc. (“Prodigy”) acquisition in April 2021, 82,201 shares of the Company’s restricted common stock (“restricted stock”) with a fair value of $10.1 million were issued to certain Prodigy employees. The restricted stock is subject to transfer restrictions and a repurchase option and is contingent upon the employees' continued employment with the Company. The repurchase option will lapse with respect to 1/8th of the shares of restricted stock at the end of each successive three-month period following the closing date of the Prodigy acquisition. The restricted stock is subject to restrictions which lapse on a quarterly basis over two years from the time of the Prodigy acquisition.

On February 24, 2023, the Company’s Compensation Committee of the Board of Directors approved the cancellation of a performance-based restricted stock unit award (“PRSUs”) that may be settled for 687,500 shares of the Company’s common stock granted to an executive in February 2022.

At the time the PRSUs were granted, the PRSUs were intended to be the executive’s primary compensation through calendar year 2029 so that, in connection with the grant of the PRSUs, the executive’s cash compensation was limited to the amount necessary to allow the executive to participate in the broad-based employee benefits generally applicable at the Company. In reaching its decision to cancel the PRSUs, the Compensation Committee

extensively considered the purpose of the PRSUs and determined that the grant no longer provided the intended retention and incentive value to the executive. After considering various alternatives and the pros and cons of such alternatives and consulting with its external advisors, the Compensation Committee believed it was in the best interest of the Company and its stockholders to cancel the PRSUs in exchange for the reinstatement of the executive’s cash compensation, including the executive’s annual base salary and eligibility to participate in the Company’s 2023 Executive Bonus Plan with an annual target bonus opportunity equal to 75% of the executive’s annual base salary.

Compensation expense associated with the PRSUs was recognized using the straight-line attribution method for each of the nine vesting tranches over the respective derived service period. The weighted-average grant date fair value using the Monte Carlo simulation was $68.76 per share. The Company recognizes stock-based compensation expense for awards subject to market-based vesting conditions regardless of whether these conditions will be achieved or not, and stock-based compensation expense for any such awards is not reversed if the market condition is not met. The cancellation of the grant was treated by the Company as a settlement for no consideration and remaining unrecognized compensation expense of $39.0 million associated with the grant was accelerated and recorded by the Company as part of engineering and product development expense on the condensed consolidated statements of operations and comprehensive income (loss) for the quarter ended March 31, 2023.

Our ESPP provides for consecutive six-month offering periods. The offering periods are scheduled to start on the first trading day on or after February 15 and August 15 of each year. The ESPP permits participants to purchase shares in the amount of 85% of the lower of the fair market value of our shares of common stock on the first trading day of the offering period or on the exercise date. During the three months ended March 31, 2023, 312,134 shares of common stock were purchased under the ESPP.

As of March 31, 2023, total unrecognized stock-based compensation expense related to the ESPP was $1.3 million, which is expected to be recognized over a remaining weighted-average period of 0.4 years.

In determining the fair value of stock-based awards, the Company uses a Black-Scholes option-pricing model for its options granted and ESPP purchase rights and a Monte Carlo simulation model for its PRSUs. The inputs used for estimating the fair values of options granted, ESPP purchase rights and PRSUs granted during the period include:

Fair Value of Common Stock–The fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market.

Expected Term–The expected term represents the period that the Company’s stock options and ESPP purchase rights are expected to be outstanding. We estimate the expected term based on the simplified method, which is the weighted-average time to vesting and the contractual maturity. The expected term for PRSUs is the simulation term, the time period from the valuation date to the end of the performance measurement period.

Volatility–Because the Company has not had an active trading market for its common stock for a sufficient period of time, the expected volatility is estimated based on the average volatility for comparable publicly-traded companies, over a period equal to the expected term of the stock option grants.

Risk-free Interest Rate–The risk-free interest rate assumption is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Dividends–The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock for the foreseeable future. Therefore, the Company uses an expected dividend yield of zero.

Three Months Ended March 31,

2022

2023

Expected term (in years)

5.2 – 7.0

5.3 – 7.0

Expected volatility

47.58% – 48.72%

50.96% – 52.89%

Risk-free interest rate

1.70% – 2.16%

3.45% – 3.45%

Dividend yield

—%

The Company recorded stock-based compensation in the following expense categories in its condensed consolidated statements of operations and comprehensive income (loss) for employees and nonemployees:


	Three Months Ended March 31,
	2022		2023
Sales and marketing	$	2,238	$	3,372
Customer operations	1,619		2,882
Engineering and product development	13,634		56,660
General, administrative, and other	7,559		11,195
Total	$	25,050	$	74,109