Equity Awards

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

We currently have three equity incentive plans, our 2005 Stock Option Plan (the “2005 Plan”), 2012 Equity Incentive Plan (the “2012 Plan”) and 2021 Equity Incentive Plan (the “2021 Plan”). The 2005 Plan was terminated in connection with our initial public offering in 2012 but continues to govern the terms of outstanding stock options that were granted prior to the termination of the 2005 Plan. We no longer grant equity awards pursuant to the 2005 Plan. The 2012 Plan was terminated in connection with the approval of the 2021 Plan on June 7, 2021 but continues to govern the terms of outstanding equity awards that were granted prior to the termination of the 2012 Plan. As of June 7, 2021, we no longer grant equity awards pursuant to the 2012 Plan.

The 2021 Plan and the 2012 Plan provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, RSUs, performance-based stock awards and other forms of equity compensation (collectively, “equity awards”). In addition, the 2021 Plan and the 2012 Plan provide for the grant of performance cash awards. Incentive stock options may be granted only to employees. All other equity awards may be granted to employees, including officers, as well as directors and consultants. Prior to June 7, 2021, the 2012 Plan share reserve was increased to the extent outstanding stock options under the 2005 Plan expire or terminate unexercised.

Our Amended and Restated 2012 Employee Stock Purchase Plan (the “2012 ESPP”) authorizes the issuance of shares of common stock pursuant to purchase rights granted to our employees. The price at which common stock is purchased under the 2012 ESPP is equal to 85% of the fair market value of our common stock on the first or last day of the offering period, whichever is lower. Offering periods are six months long and begin on February 1 and August 1 of each year. Prior to June 7, 2021, the number of shares of common stock reserved for issuance automatically increased on January 1 of each year, by up to 1% of the total number of shares of common stock outstanding on December 31 of the preceding year as determined by our board of directors. Our board of directors elected not to increase the number of shares of common stock reserved for issuance under the 2012 ESPP pursuant to the provision described in the preceding sentence for the year ending December 31, 2021, and for the remaining term of the 2012 ESPP, the share reserve will not be increased without shareholder approval.

Stock Options

Stock options are exercisable at a price equal to the market value of the underlying shares of common stock on the date of the grant as determined by our board of directors or, for those stock options issued subsequent to our initial public offering, the closing price of our common stock as reported on the New York Stock Exchange on the date of grant. Stock options granted under the 2005 Plan and the 2012 Plan to new employees generally vest 25% one year from the date the requisite service period begins and continue to vest monthly for each month of continued employment over the remaining three years. Stock options granted under the 2021 Plan vest in eight equal tranches based on service conditions and achievement of both performance and market conditions. Options granted generally are exercisable for a period of up to ten years contingent on each holder’s continuous status as a service provider.

A summary of stock option activity was as follows:


	Number of Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in thousands)			(in years)	(in millions)
Outstanding at December 31, 2019	1,154	$	77.70

Exercised	(621)	$	52.98		$	199
Canceled	(11)	$	75.77
Outstanding at December 31, 2020	522	$	107.14
Granted (1)	1,052	$	676.77
Exercised	(267)	$	59.60		$	140
Canceled	(2)	$	84.24
Outstanding at December 31, 2021	1,305	$	551.39	8.8	$	157
Vested and expected to vest as of December 31, 2021	1,037	$	528.37	8.6	$	148
Vested and exercisable as of December 31, 2021	178	$	92.06	3.7	$	99

(1) Includes awards assumed in business combinations

Aggregate intrinsic value represents the difference between the estimated fair value of our common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value of the options exercised was $138 million for the year ended December 31, 2019.

The weighted-average grant date fair value per share of options granted was $248.85 for the year ended December 31, 2021. The total fair value of shares vested was $10 million, $7 million and $8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

In the fourth quarter of 2021, the board of directors and the compensation committee approved a one-time long-term performance-based options to the Chief Executive Officer (“2021 CEO Performance Award") and to certain executives (collectively “2021 Performance Awards”), respectively, for a total grant date fair value of $232 million. The 2021 Performance Awards will vest in eight equal tranches based on service and achievement of both performance and market conditions, subject to continued employment and specifically for the 2021 CEO Performance Award, as CEO or Executive Chairman of the Company, through each vesting date. The performance and market condition for a particular tranche may be achieved at different points in time and in any order but will become eligible to vest only when all service, performance and market conditions for the respective tranche are met but no earlier than two years. The performance and market condition must be achieved by September 30, 2026 (the "Performance Period"). The stock price metric will be achieved when both the 180-Day volume weighted average price ("VWAP") and the 30-Day VWAP equal or exceed the respective tranche stock price metric on any day during the Performance Period. The performance metric is achieved when the trailing four quarter cumulative GAAP subscription revenues equal or exceed the respective tranche performance target. Shares acquired upon exercise of the options cannot be sold, transferred or disposed until after the end of the Performance Period and the 2021 Performance Awards will expire ten years from the respective date of grant.

The fair value of the 2021 Performance Awards and the corresponding derived service periods were estimated using the Monte Carlo simulation. Stock-based compensation expense is recognized on a graded vesting basis over the requisite service period for each respective tranche, but not shorter than the two year minimum service period, and includes an assessment of when it is probable the performance condition will be achieved which involves subjective assessment of our future financial projection.

As of December 31, 2021, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options was approximately $132 million. The weighted-average remaining vesting period of unvested stock options at December 31, 2021 was three years.

RSUs

A summary of RSU activity was as follows:


	Number of Shares	Weighted-Average Grant-Date Fair Value Per Share
	(in thousands)
Outstanding at December 31, 2019	8,733	$	185.39
Granted	3,643	$	367.52
Vested	(4,250)	$	181.85
Forfeited	(764)	$	221.84
Outstanding at December 31, 2020	7,362	$	274.23
Granted	2,912	577.26
Vested	(3,653)	$	268.81
Forfeited	(813)	354.42
Outstanding at December 31, 2021	5,808	$	416.00
Expected to vest as of December 31, 2021	5,209

RSUs outstanding as of December 31, 2021 were comprised of 5.5 million RSUs with only service conditions and 0.3 million RSUs with both service conditions and performance conditions, including certain RSUs with additional market conditions. The total intrinsic value of the RSUs vested was $2.1 billion, $1.8 billion and $1.4 billion for the years ended December 31, 2021, 2020 and 2019, respectively. The aggregate intrinsic value of the RSUs outstanding and expected to vest as of December 31, 2021 was $3.8 billion and $3.4 billion, respectively.

For the years ended December 31, 2021 and 2020, PRSUs with service, performance and market vesting criteria are considered as eligible to vest when approved by the compensation committee of our board of directors in January of the year following the grant. The ultimate number of shares eligible to vest range from 0% to 200% depending on achievement relative to the performance metrics and for PRSUs granted in 2021, further depends on our total shareholder return relative to that of the S&P 500 index over the applicable measurement period. The eligible shares will vest in February of the following year and either vest semi-annually or quarterly thereafter over the remaining two years, contingent on each holder’s continuous status as a service provider on the applicable vesting dates. The number of PRSUs granted shown in the table above reflects the shares that could be eligible to vest at 100% of target for PRSUs and includes adjustments for over or under achievement granted in the prior year. In July 2020, our board of directors approved a modification to the fiscal year 2020 performance target. As a result, an incremental expense of $29 million is recognized over the remaining vesting period.

We recognized $124 million, $70 million, and $68 million of stock-based compensation expense, net of actual and estimated forfeitures, associated with PRSUs on a graded vesting basis during the year ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs was approximately $2.0 billion and the weighted-average remaining vesting period was three years.

Valuation Assumptions

The following assumptions were used in the Black-Scholes options pricing model and the Monte Carlo simulation model, to estimate our stock-based compensation on the date of the grant for ESPP, stock options and PRSUs, respectively, as applicable.


	Year Ended December 31,
	2021	2020	2019
Risk Free Interest Rate
ESPP	0.06% - 0.11%	0.11% - 2.04%	2.04% - 2.46%
Stock Options	1.20% - 1.45%	*	1.80	%
PRSU	0.19% - 0.20%	**	**
Expected Term (in years)
ESPP	0.5	0.5	0.5
Stock Options	7.5 - 10	*	10
Expected Volatility
ESPP	35% - 60%	30% - 60%	30% - 49%
Stock Options	38% - 41%	*	40	%
PRSU	41% - 42%	**	**

* There were no stock option grants in 2020.

** There were no grants with market conditions for the respective fiscal year.

Expected volatility. The expected volatility is based on the historical volatility of our common stock for a period similar to our expected term.

Expected term. We determine the expected term based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. We estimate the expected term for ESPP using the purchase period.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock-based award.

Expected dividend yield. Our expected dividend yield is zero, as we have not and do not currently intend to declare dividends in the foreseeable future.