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Share-based compensation
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Share-based compensation Share-based compensation
The Company’s equity incentive plans provide for granting various share-based awards to eligible employees, non-employee directors, and consultants of the Company. In addition, the Company offers an employee stock purchase plan to eligible employees.
The Company recognized stock-based compensation expense for all equity arrangements as follows:
Years Ended December 31,
202220212020
(in thousands)
Cost of revenue:
Subscription$8,854 $3,755 $732 
Services1,299 594 139 
Sales and marketing33,559 10,938 1,748 
Research and development24,392 10,512 1,533 
General and administrative41,066 10,006 2,591 
$109,170 $35,805 $6,743 
The Company recognized a tax benefit related to stock-based compensation of $10.1 million, $12.8 million, and $3.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Equity Incentive Plans
On July 21, 2020, the Company adopted the 2020 Plan. The 2020 Plan provides for grants of (i) stock options, (ii) stock appreciation rights, (iii) restricted shares, (iv) performance awards, (v) other share-based awards, and (vi) other cash-based awards to eligible employees, non-employee directors, and consultants of the Company. We initially reserved 14,800,000 shares of our common stock for issuance under the 2020 Plan. The total number of shares reserved for issuance under the 2020 Plan increases on January 1st of each of the first 10 calendar years during the term of the 2020 Plan by the lesser of: (i) a number of shares of our common stock equal to 4% of the total number of shares of our common stock outstanding on December 31st of the preceding calendar year or (ii) a number of shares of our common stock as determined by our Board. The maximum number of shares of common stock available for issuance under the 2020 Plan was 24,256,740 shares as of January 1, 2022. As of December 31, 2022, 13,413,731 shares of common stock are reserved for additional grants under the 2020 Plan.
The 2017 Option Plan became effective November 13, 2017 upon the approval of the Board and, prior to the adoption of the 2020 Plan, served as the umbrella plan for the Company’s stock-based and cash-based incentive compensation program for its officers and other eligible employees. The aggregate number of shares of common stock that may be issued under the 2017 Option Plan may not exceed 8,470,000 shares. As of December 31, 2022, 128,928 shares of common stock are reserved for additional grants under the 2017 Option Plan. All stock options previously granted by the Company were at an exercise price at or above the estimated fair market value of the Company’s common stock as of the grant date.
Return Target Options
The table below summarizes return target option activity for the year ended December 31, 2022:
OptionsWeighted-
Average
Exercise
Price		Weighted-
Average
Remaining
Contractual
Term (Years)		Aggregate
Intrinsic
Value
(in thousands)
Outstanding, December 31, 20213,687,664 $6.75 6.8$115,278 
Granted— — 
Exercised(414,744)6.75 
Forfeitures— — 
Outstanding, December 31, 20223,272,920 $6.75 5.8$47,623 
Options exercisable at December 31, 20223,272,920 $6.75 5.8$47,623 
Vested or expected to vest at December 31, 20223,272,920 $6.75 5.8$47,623 
The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the optionholders had all optionholders exercised their options on the last day of the period. No return target options were granted during the years ended December 31, 2022, 2021, and 2020. The return target options outstanding on June 27, 2022 were modified such that these options were deemed fully vested as of June 30, 2022. During the three months ended June 30, 2022, with the filing of a Form S-3 “shelf” registration statement, the market condition and the implied performance obligation were deemed to be satisfied and the Company recognized $33.0 million of stock-based compensation expense. See Note 2 for further information. There is no remaining unrecognized compensation expense related to these return target options as of December 31, 2022. The total fair value of return target options vested during the year ended December 31, 2022 was $33.0 million. The aggregate intrinsic value of the options exercised, which represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option, was $7.9 million for the year ended December 31, 2022. No return target options vested or were exercised during the years ended December 31, 2021 and 2020. The Company issues new shares when return target options are exercised.
Service-Based Options
The table below summarizes the service-based option activity for the year ended December 31, 2022:
OptionsWeighted‑
Average
Exercise
Price		Weighted‑
Average
Remaining
Contractual
Term (Years)		Aggregate
Intrinsic
Value
(in thousands)
Outstanding, December 31, 20211,643,266 $5.68 6.1$53,129 
Granted— — 
Exercised(427,444)5.62 
Forfeitures— — 
Outstanding, December 31, 20221,215,822 $5.70 5.1$18,968 
Options exercisable at December 31, 20221,162,656 $5.58 5.0$18,272 
Vested or expected to vest at December 31, 20221,215,822 $5.70 5.1$18,968 
The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the optionholders had all optionholders exercised their options on the last date of the period. Service-based options vest over four years with 25% vesting one year after grant and the remainder vesting ratably on a quarterly basis thereafter. The Company issues new shares when service-based options are exercised. All service-based options outstanding under the Company’s option plans have exercise prices equal to the fair value of the Company’s stock on the grant date. All awards expire after 10 years.
No service-based options were granted during the years ended December 31, 2022, 2021, and 2020. The aggregate intrinsic value of the options exercised, which represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option, was $11.2 million, $54.7 million, and $13.9 million for the years ended December 31, 2022, 2021, and 2020, respectively. The total fair value of service-based options vested
during the years ended December 31, 2022, 2021, and 2020 was $0.7 million, $2.6 million, and $2.6 million, respectively. There was $0.3 million of unrecognized compensation expense related to service-based options that is expected to be recognized over a weighted-average period of 0.9 years as of December 31, 2022.
Restricted Stock Units
RSU activity for the year ended December 31, 2022 was as follows:
UnitsWeighted-Average Grant Date Fair Value (per share)
Outstanding, December 31, 20216,890,938 $31.59 
Granted4,065,117 27.50 
Vested(1,895,620)31.88 
Forfeited(643,078)30.67 
Outstanding, December 31, 20228,417,357 $29.61 
RSUs under the 2020 Plan generally vest ratably on an annual basis over four years. RSUs under the 2017 Option Plan vest 100% on the one year anniversary of the date of the grant. The weighted-average grant date fair value of RSUs granted during the years ended December 31, 2022, 2021, and 2020 was $27.50, $32.51, and $26.33, respectively. There was $216.1 million of unrecognized compensation expense related to unvested RSUs that is expected to be recognized over a weighted-average period of 2.9 years as of December 31, 2022. The total fair value of RSUs vested during the years ended December 31, 2022, 2021, and 2020 was $60.4 million, $16.2 million, and $0.5 million, respectively.
Long-Term Incentive Plan
In the third quarter of 2021, the Company offered employees with LTIP grants the opportunity to convert those awards into RSUs under the 2020 Plan. Upon conversion, 50% of the RSUs vested immediately and the remaining 50% vested on the one year anniversary of the grant date, provided the employee remained continuously employed by the Company through the vesting date. All employees elected to convert their outstanding LTIP grants into RSUs, resulting in grants totaling 413,234 shares.
The conversion of the previously outstanding LTIP grants into RSUs resulted in the recognition of $4.5 million and $9.8 million of stock-based compensation expense during the years ended December 31, 2022 and 2021, respectively. The expense on the unvested RSUs was recognized on a straight-line basis over the vesting period.
Employee Stock Purchase Plan
On May 25, 2021, the Company adopted the 2021 ESPP. The 2021 ESPP provides for six-month offering periods beginning May 1st and November 1st of each fiscal year and provides eligible employees the opportunity to purchase shares of the Company’s common stock through accumulated payroll deductions at a 15% discount. On each purchase date, the purchase price of the shares is the lesser of (i) 85% of the fair market value of the Company’s common stock on the first day of trading of the offering period or (ii) 85% of the fair market value of the Company’s common stock on the last day of trading of the offering period. Payroll deductions are limited to 15% of an employee’s eligible compensation. The number of shares an employee may purchase during any offering period is limited to an aggregate value of $25,000 per calendar year based on the stock price on the first day of trading of the offering period. As of December 31, 2022 and 2021, the Company withheld, at the employees’ request, $1.1 million and $1.2 million, respectively, of eligible employee compensation, which is included in accrued liabilities in the consolidated balance sheet, for purchases of common stock under the 2021 ESPP.
As of December 31, 2022, 3,899,071 shares of common stock were reserved for future issuance under the 2021 ESPP. The total number of shares reserved for issuance under the 2021 ESPP increases on January 1st of each of the first 10 calendar years after the first offering date by a number of shares of our common stock equal to 1% of the total number of shares of our common stock outstanding on December 31st of the preceding calendar year. The aggregate number of shares issued over the term of the 2021 ESPP will not exceed 16,000,000 shares. During the year ended December 31, 2022, the Company’s employees purchased 295,189 shares of common stock under the 2021 ESPP at a weighted-average purchase price of $22.80 per share. Total proceeds to the Company were $6.8 million during the year ended December 31, 2022. No shares of common stock were issued under the 2021 ESPP during the year ended December 31, 2021.
The grant date fair value of shares issued under the 2021 ESPP equals the sum of (i) 15% of the Company’s quoted stock price on the first day of trading of the offering period and (ii) 85% of the fair market value of a stock option using the Black-Scholes option pricing model. The average grant date fair value for the offering periods under the 2021 ESPP that commenced in 2022 was $8.28 per share. The average grant date fair value for the offering period under the 2021 ESPP that commenced in 2021 was $11.97 per share. The Company used the following assumptions in the Black-Scholes option pricing model:
Years Ended December 31,
20222021
Expected term0.5 years0.5 years
Expected volatility
60.05% - 64.90%
40.31%
Risk-free interest rate
1.49% - 4.58%
0.06%
Expected dividend yield—%—%
There was $0.9 million of unrecognized compensation expense related to the 2021 ESPP that is expected to be recognized over a period of four months as of December 31, 2022.