Stock-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

10. Stock-Based Compensation

As of September 30, 2024 and December 31, 2023, there were 500,000,000 shares of common stock authorized. As of September 30, 2024 and December 31, 2023, there were 147,089,318 and 145,207,497 shares of common stock issued and outstanding, respectively.

Employee Equity Plans

The Instructure Parent, LP Incentive Equity Plan (the “2020 Plan”) was terminated in July 2021 in connection with the Company’s initial public offering (the “IPO”). As of the IPO date, 6,126,802 unvested incentive units were exchanged for 3,496,739 RSUs under the 2021 Omnibus Incentive Plan (the “2021 Plan”). These RSUs generally vested in 11 equal quarterly installments commencing September 1, 2021.

In July 2021, our board of directors adopted the 2021 Plan and no shares remain available for issuance under the 2020 Plan. A total of 18,000,000 shares of the Company's common stock were initially reserved for issuance under the 2021 Plan. Pursuant to the terms of the 2021 Plan, the share reserve increased by 5,808,300 shares in January 2024. As of September 30, 2024, we had 21,801,632 shares of common stock available for future grants under the 2021 Plan.

In July 2021, our board of directors adopted, and our stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which allows eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. Each new offering period begins on or about March 1 and September 1 and is approximately six months in duration. On each purchase date, eligible employees can purchase our common stock at a price per share equal to 85% of the lesser of (1) the fair market value of our common stock on the offering date or (2) the fair market value of our common stock on the purchase date. A total of 1,900,000 shares of the Company’s common stock were initially reserved for issuance under the 2021 ESPP. Pursuant to the terms of the 2021 ESPP, the share reserve increased by 1,452,075 shares in January 2024. As of September 30, 2024, 5,162,907 shares of common stock were available for purchase under the 2021 ESPP. As a result of the entry into the Merger Agreement, we ceased withholding payroll deductions after our most recent purchase date on September 3, 2024, and pending the completion of the Merger, and we do not anticipate future offerings of our common stock under the 2021 ESPP.

During the three months ended September 30, 2024, we granted 234,170 RSUs to employees under the 2021 Plan. Each RSU entitles the recipient to receive one share of the Company’s common stock upon vesting. The RSUs are subject to time-based service requirements and generally vest over a four-year service period. The grant date fair value of the RSUs granted during the three months ended September 30, 2024 ranged from $24.49 to $25.0, which represents the closing stock price for the underlying common stock on the respective grant dates, with an aggregate fair value of $5.7 million.

The following two tables present stock-based compensation by award type and classification of stock-based compensation expense recorded within our condensed consolidated statements of operations and comprehensive loss (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Restricted stock units	$	14,113	$	11,343	$	41,351	$	32,420
Shares issuable under employee stock purchase plan		238		412		997		1,201
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621



	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Subscription and support cost of revenue	$	750	$	459	$	2,107	$	1,312
Professional services and other cost of revenue		864		603		2,451		1,639
Sales and marketing		4,170		3,145		11,612		9,142
Research and development		4,469		3,792		13,047		10,446
General and administrative		4,098		3,756		13,131		11,082
Total stock-based compensation	$	14,351	$	11,755	$	42,348	$	33,621

Restricted Stock Units

The following table summarizes the activity of RSUs for the nine months ended September 30, 2024 (in thousands, except per unit amounts):


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		4,470		$	23.68
Granted		4,335			21.99
Vested		(1,445	)		22.75
Forfeited or canceled		(645	)		22.93
Unvested and outstanding at September 30, 2024		6,715		$	22.86

As of September 30, 2024 and December 31, 2023, total unrecognized compensation cost related to unvested RSUs amounted to $138.8 million and $95.1 million, respectively, which is expected to be recognized over a weighted average period of 2.9 years and 2.9 years, respectively.

The following table summarizes the activity of the incentive units granted under the 2020 Plan, subsequent to their conversion into RSUs under the 2021 Plan, for the nine months ended September 30, 2024 (in thousands, except per unit amounts):


	RSUs			Weighted Average Grant Date Fair Value Per Unit
Unvested and outstanding at December 31, 2023		320		$	12.30
Vested		(320	)		12.30
Unvested and outstanding at September 30, 2024		—

There were no incentive units granted subsequent to December 31, 2021 under the 2020 Plan. As of September 30, 2024 and December 31, 2023, we had less than $0.1 million and $2.4 million, respectively, of unrecognized stock-based compensation expense related to unvested incentive units exchanged for RSUs that are expected to be recognized over a weighted-average period of 0.2 and 0.3 years, respectively.

2021 ESPP

The following table summarizes the assumptions relating to 2021 ESPP purchase rights used in a Black-Scholes option pricing model for the three months ended September 30, 2024 and 2023:


	Three months ended September 30,
	2024	2023
Dividend yield	None	None
Volatility	18%	18 - 25%
Risk-free interest rate	5.27%	5.20 - 5.47%
Expected life (years)	0.5	0.5

INSTRUCTURE HOLDINGS, INC. 10-Q