ZIPRECRUITER INC

1. Organization and Description of Business

ZipRecruiter, Inc. was incorporated in the state of Delaware on June 29, 2010. Hereinafter, ZipRecruiter, Inc. and its wholly owned subsidiaries ZipRecruiter Israel Ltd., ZipRecruiter UK Ltd., ZipRecruiter Canada Ltd., and Poplar Technologies Ltd. are collectively referred to as “ZipRecruiter” or the “Company.” The Company is a two-sided marketplace that enables employers and job seekers to connect with one another online to fill job opportunities.

On July 23, 2024, ZipRecruiter, Inc. acquired all of the outstanding share capital of Poplar Technologies Ltd (d/b/a Breakroom) (“Breakroom”). Breakroom is a UK-based employee review platform focused on frontline industries such as retail and hospitality.

2. Basis of Presentation, Principles of Consolidation, and Summary of Significant Accounting Policies

The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, certain information and disclosures normally included in consolidated financial statements presented in accordance with U.S. GAAP have been condensed or omitted.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”). The condensed consolidated balance sheet as of December 31, 2023 has been derived from the Company’s audited consolidated financial statements. Certain reclassifications have been made to the presentation of the prior year to conform to the presentation of the current year.

In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for the fair statement of the condensed consolidated financial statements.

There have been no changes in the Company’s accounting policies from those disclosed in the Company’s audited consolidated financial statements and the related notes included in the 2023 Form 10-K, except for the accounting policies related to business combinations, intangible assets and goodwill, which are discussed in Note 4 and later in this Note.

The operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results expected for the full year ending December 31, 2024 or any future period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes thereto. Actual results could differ from those estimates.

Business Combinations

The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair values on the acquisition date. The excess of the purchase price over the fair values of net identifiable assets acquired and liabilities assumed is recorded as goodwill.

Determining the fair values of assets acquired and liabilities assumed may require management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, estimates of costs, discount rates and selection of comparable companies. The Company’s estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Transaction costs associated with business combinations are expensed as incurred.

Intangible Assets

Intangible assets are amortized over their estimated useful life using the straight-line method which approximates the pattern in which the economic benefits are consumed.

Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The excess of the purchase price over the fair values of net identifiable assets acquired and liabilities assumed is recorded as goodwill. During the three and nine months ended September 30, 2024, the Company recognized $6.8 million in additional goodwill related to its acquisition of Breakroom. For more information on the Breakroom acquisition, please see Note 4. The Company tests for impairment at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that goodwill might be impaired. The Company currently hasone reporting unit.

Investments

The Company classifies and accounts for its money market mutual funds which have readily determinable fair values as equity securities, and it carries such securities at fair value with unrealized gains and losses reported in other income (expense), net in its condensed consolidated statements of operations.

The Company classifies and accounts for its debt securities as available-for-sale, and it carries such securities at fair value with unrealized gains and losses reported net of tax as a separate component of stockholders' equity in accumulated other comprehensive income. During both the three and nine months ended September 30, 2024, in connection with its available-for-sale debt securities, the Company recorded pre-tax unrealized gains of $0.2 million in other comprehensive income (loss) withno associated tax benefit. During the three and nine months ended September 30, 2023, in connection with its available-for-sale debt securities, the Company recorded pre-tax unrealized gains of $0.1 million and $0.2 million, respectively, in other comprehensive income (loss), withno associated tax benefit.

The Company determines any realized gains and losses on the sale of its available-for-sale debt securities using a specific identification method, and it records such gains and losses through other income (expense), net in its condensed consolidated statements of operations. During the three and nine months ended September 30, 2024 and 2023, the Company didnot have any sales of its available-for-sale debt securities and consequently, didnot reclassify any amounts out of accumulated other comprehensive income into other income (expense), net in the condensed consolidated statements of operations.

Fair Value Measurements

The Company measures certain of its financial instruments at fair value on a recurring basis. Financial instruments measured at fair value on a recurring basis primarily include the Company’s cash equivalents and marketable securities.

The Company also measured certain assets acquired and liabilities assumed as part of a business combination at fair value on a nonrecurring basis upon acquisition of all of the outstanding share capital of Breakroom on July 23, 2024. For more information on the Breakroom acquisition, please see Note 4.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting standards describe a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

• Level 1 — Quoted prices in active markets for identical assets, liabilities, or funds.

• Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Segments and Geographic Information

The Company operates as a single operating segment. The Company’s Chief Operating Decision Maker, the CEO, regularly reviews financial information presented on a consolidated basis for purposes of assessing financial performance and allocating resources. Revenue is attributed to geographic regions based on locations where services are provided to the Company’s customers. Foreign countries outside of the United States, in aggregate, accounted for less than 2% of the Company’s revenue for the three and nine months ended September 30, 2024 and 2023. In addition, long-lived assets outside of the United States were not material as of September 30, 2024 and December 31, 2023.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains its cash accounts with large financial institutions and at times, the cash accounts may exceed Federal Deposit Insurance Corporation limits. The Company has not experienced any losses in such accounts. The Company monitors the relative credit standing of the financial institutions with which it transacts and limits its credit exposure to any singular entity. Accordingly, the Company believes minimal credit risk exists with respect to these cash balances.

The Company invests only in highly rated debt and equity securities. The Company believes the financial institutions that hold its investments are financially sound, and accordingly, are subject to minimal credit risk.

No customers accounted for 10% or more of the Company’s outstanding accounts receivable as of September 30, 2024. One customer accounted for 10% of the Company’s outstanding accounts receivable as of December 31, 2023. The Company closely monitors the financial condition of the foregoing customer, which has been in good credit standing. The Company does not consider the concentration of its accounts receivable to be a material risk. For the three and nine months ended September 30, 2024 and 2023, there were no customers that individually represented 10% or more of revenue.

The Company uses third parties to collect its credit card receivables and believes risk related to its credit card processors is minimal.

Share Repurchase Program

All shares repurchased under the Company’s share repurchase program are purchased for immediate retirement. Repurchased shares reduce the Company’s outstanding shares and its weighted average number of common shares outstanding for purposes of calculating basic and diluted earnings per share. All excess of repurchase price over par value for shares repurchased is allocated to retained earnings to the extent the Company has retained earnings. If the Company has an accumulated deficit, all excess of repurchase price over par value for shares repurchased is allocated first to additional paid-in capital, to the extent the Company has additional paid-in capital, until depleted, and then to accumulated deficit in the Company’s condensed consolidated statements of changes in stockholders' equity (deficit). The Company may repurchase shares of common stock through open market or privately negotiated transactions, block purchases, or pursuant to one or more Rule 10b5-1 plans. For more information on the Company’s share repurchase program, please see Note 10.

Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosure requirements about a public entity’s reportable segments and significant segment expenses. This update also expands the interim segment disclosure requirements. Public entities that have a single reportable segment will be required to provide on both an interim and annual basis all the disclosures required by Topic 280, including those added by the amendments in ASU 2023-07. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The adoption of this update would not be expected to have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which intends to enhance the transparency and decision usefulness of income tax disclosures, primarily through expanding disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of this update on its consolidated financial statements.

3. Net Income (Loss) Per Share

The following table presents the Company’s basic net income (loss) per share (in thousands, except per share amounts):

The following table presents the Company’s diluted net income (loss) per share (in thousands, except per share amounts):

The weighted average number of potentially dilutive common stock equivalents of 12.4 million and 12.8 million were excluded from the computation of diluted net loss per share during the three and nine months ended September 30, 2024, respectively, because their inclusion would have been anti-dilutive. The weighted average number of potentially dilutive common stock equivalents of 5.9 million and 6.2 million were excluded from the computation of diluted net income per share during the three and nine months ended September 30, 2023, respectively, because their inclusion would have been anti-dilutive.

In April 2021, the Company granted a restricted stock unit (“RSU”) award (the “CEO Performance Award”), which included service, market, and performance-based vesting conditions. The CEO Performance Award is excluded from the above table because none of the market conditions had been met as of September 30, 2023. Additionally, in December 2023, the Company entered into a Cancellation Agreement with the CEO, which provided for the cancellation of the 1.4 million RSUs included in the CEO Performance Award. For more information on the Cancellation Agreement, please see Note 11.

4. Acquisitions

On July 23, 2024, the Company entered into a share purchase agreement with, and acquired 100% of the outstanding share capital in, Breakroom. Breakroom is a UK-based employee review platform focused on frontline industries such as retail and hospitality. The Company believes there is an opportunity with Breakroom to complement its employment sites in the United States.

The fair value of consideration transferred on the date of acquisition totaled $13.3 million, consisting of $12.4 million paid in cash and a liability of $0.9 million assumed related to non-employee investor holdback consideration. Such non-employee holdback consideration is payable one year subsequent to the date of acquisition. This consideration is subject to customary holdback provisions and is not contingent upon the occurrence of specified future events.

The financial results of Breakroom from the date of acquisition were included in the Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2024. Pro forma results of operations have not been presented as the results do not have a material effect on any of the periods presented in the Company’s condensed consolidated financial statements.

The following table summarizes the estimated fair values of identified assets and liabilities as of the acquisition date (in thousands):

The following table summarizes the estimated fair values of identifiable intangible assets acquired and their estimated useful life at the date of acquisition (in thousands, except useful life information):

Amortization expense for such finite-lived intangible assets was $0.4 million during both the three and nine months ended September 30, 2024. Future amortization expense for the Company’s finite-lived intangible assets as of September 30, 2024 is as follows for the years ended December 31, (in thousands):

The estimated fair value of the developed technology acquired was determined using the replacement cost method. This approach requires the use of inputs within Level 3 in the fair value hierarchy related to the cost to replace the technology, including time and resources required, as well as an estimated profit margin and opportunity cost.

The estimated fair value of the trade names and trademarks acquired was determined using the relief-from-royalty method. This approach requires the use of inputs within Level 3 in the fair value hierarchy, including revenue projections, a royalty rate based on qualitative factors and market-derived royalty rates, and a discount rate based on the Company’s weighted average cost of capital adjusted for risks commonly inherent in trade names.

Goodwill is primarily attributable to the workforce of the acquired business and benefits related to expanded market opportunities from integrating Breakroom’s technology with the Company’s marketplace offerings. All of the goodwill was assigned to the Company’s single reporting unit and is not deductible for tax purposes.

The Company estimated the fair values of assets acquired and liabilities assumed as of the date of the acquisition based on currently available information. The fair value of consideration transferred is subject to customary holdback provisions, related to non-employee investor holdback consideration, applicable during a measurement period of one year from the acquisition.

Upon the close of the transaction, the Company agreed to pay up to $3.5 million to former Breakroom founders, in equal quarterly installments over athree-year period post-closing of the transaction, contingent upon those employees’ continued employment with the Company (the “Employee Seller Holdback Consideration”). These costs are expensed over the continued employment period. For both the three and nine months ended September 30, 2024, the Company incurred expenses of $0.3 million related to the Employee Seller Holdback Consideration, of which $0.2 million were recorded in research and development expenses and $0.1 million were recorded in general and administrative expenses within the Company’s condensed consolidated statements of operations. Additional acquisition-related costs were not material for the three and nine months ended September 30, 2024.

5. Revenue Information

The Company disaggregates revenue intotwo streams: subscription revenue and performance-based revenue. The following table presents the Company’s revenue streams (in thousands):

The Company recognized $11.7 million and $16.9 million of revenue during the three months ended September 30, 2024 and 2023, respectively, that was included in the deferred revenue balances as of June 30, 2024 and 2023, respectively.

The Company recognized $12.7 million and $19.4 million of revenue during the nine months ended September 30, 2024 and 2023, respectively, that was included in the deferred revenue balances as of December 31, 2023 and 2022, respectively.

As of September 30, 2024 and December 31, 2023, the Company hadno contract assets.

Performance Obligations

Animmaterial amount of revenue was recognized during the nine months ended September 30, 2024 from performance obligations satisfied in previous periods. No revenue was recognized during the three months ended September 30, 2024 and the three and nine months ended September 30, 2023 from performance obligations satisfied in previous periods.

As of September 30, 2024, the Company did not have any material remaining performance obligations expected to be recognized in the future. Generally, any remaining performance obligations relate primarily to subscription services such as time-based job posting plans, upsell services, and resume database plans that will be invoiced in future periods, and exclude (i) contracts with an original expected term of one year or less and (ii) contracts for which the Company only recognizes revenue at the amount to which it has the right to invoice for services performed.

6. Financial Instruments

Fair Value Measurements

The following table presents the Company’s financial assets measured at fair value on a recurring basis, as well as the amortized cost basis and gross unrealized gains and losses of those assets as of September 30, 2024 (in thousands):

As of December 31, 2023, the Company’s financial assets consisted of the following (in thousands):

The Company’s money market mutual funds and treasury securities are measured at fair value using quoted prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. The fair values of the Company’s Level 2 commercial paper and certificates of deposit are determined using quoted prices in markets that are not active or using model-driven valuations employing significant inputs derived from observable market data. The fair values of the Company’s Level 2 corporate notes and obligations, asset-backed securities, and U.S. agency securities are determined using an evaluated price based on a compilation of reported market information, such as benchmark yield curves, credit spreads and estimated default rates.

The carrying amounts of the Company’s remaining financial instruments not discussed in the above table, including accounts receivable and accounts payable, approximate fair value because of their short-term maturities, except for the Company’s $550.0 million senior unsecured notes (the “Notes”) which are valued on a quarterly basis for disclosure purposes only based on quoted prices for the Notes in less active markets and categorized accordingly as Level 2 in the fair value hierarchy. The aggregate fair value of the Notes was estimated to be approximately $492.3 million as of September 30, 2024 and approximately $478.5 million as of December 31, 2023.

Equity Securities

The Company’s investments in equity securities consist primarily of money market mutual funds. During the three and nine months ended September 30, 2024 and 2023, the Company recordedno material unrealized gains or losses in connection with its money market mutual funds held as of September 30, 2024.

Available-for-sale Debt Securities

The following table summarizes the fair value of the Company’s available-for-sale debt securities by contractual maturity as of September 30, 2024 (in thousands):

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations.

The following table summarizes the available-for-sale debt securities which have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of September 30, 2024 (in thousands):

The following table summarizes the available-for-sale debt securities which have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of December 31, 2023 (in thousands):

The Company didnot recognize any credit losses for its available-for-sale debt securities during the three and nine months ended September 30, 2024 and 2023. The Company hadno ending allowance balances for credit losses as of September 30, 2024 or December 31, 2023.

During the three and nine months ended September 30, 2024 and 2023, the Company hadno sales of its available-for-sale debt securities.

7. Accrued Expenses

Accrued expenses consist of the following (in thousands):

8. Debt

Credit Facility

In April 2021, the Company entered into a $250.0 million credit facility agreement with a syndicate of banks. In July 2024, the Company entered into a supplement to the credit facility agreement, which increased the aggregate revolving commitments available under the credit facility from $250.0 million to $290.0 million. The credit facility has a maturity date of April 30, 2026. The Company hadno amounts outstanding under its credit facility and was in compliance with the financial covenants as of September 30, 2024. The amount available under the credit facility as of September 30, 2024 was $287.6 million, which is the credit limit less letters of credit outstanding of $2.4 million.

Senior Unsecured Notes

On January 12, 2022, the Company issued an aggregate principal amount of $550.0 million senior unsecured Notes in a private placement. The Notes will mature on January 15, 2030 and bear interest at a rate of 5% per year. Interest on the Notes is payable semi-annually in arrears on January 15 and July 15 of each year. Unpaid interest amounts are included within accrued interest in the Company’s condensed consolidated balance sheets. At its sole discretion, the Company has the option to redeem the Notes at any time in whole or in part at specified redemption prices.

The Company includes its Notes, net of debt issuance costs, within long-term borrowings in its condensed consolidated balance sheets. As of September 30, 2024, the Company had a carrying amount of approximately $6.6 million of debt issuance costs related to the Notes.

For both the three months ended September 30, 2024 and 2023, the Company recognized $7.1 million in interest expense related to the Notes, and for both the nine months ended September 30, 2024 and 2023, the Company recognized $21.4 million in interest expense related to the Notes, with an effective interest rate of 5.4% for all periods. Such interest expense includes $0.3 million related to the amortization of debt issuance costs for both the three months ended September 30, 2024 and 2023, and $0.8 million related to the amortization of debt issuance costs for both the nine months ended September 30, 2024 and 2023.

9. Commitments and Contingencies

Legal Matters

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. If the Company determines that it is probable that a loss has been incurred and the amount is reasonably estimable, the Company will record a liability. However, if the Company determines that a contingent loss is reasonably possible and the loss or range of loss can be estimated, the Company will disclose the possible loss in the condensed consolidated financial statements. Legal costs relating to loss contingencies are expensed as incurred.

Indemnification

In the ordinary course of business, the Company may provide indemnification of varying scopes and terms to customers, investors, directors and officers with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from certain claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has the Company been sued in connection with these indemnification arrangements. As of September 30, 2024, the Company hasnot accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements is neither probable nor reasonably estimable.

10. Share Repurchase Program

The Company’s board of directors has authorized the Company to repurchase up to $550.0 million of outstanding shares of its common stock pursuant to a share repurchase program (the “Program”). Under the Program, the Company may repurchase shares of common stock through open market or privately negotiated transactions, block purchases, or pursuant to one or more Rule 10b5-1 plans. The Program does not obligate the Company to repurchase shares of common stock. There is no minimum or maximum number of shares to be repurchased under the Program.

During the nine months ended September 30, 2024, the Company repurchased an aggregate 3.9 million shares of its Class A common stock for an aggregate purchase price of $37.6 million under the Program through open market purchases.

Approximately $25.8 million remains available for future repurchases of Class A common stock under the Program as of September 30, 2024.

All shares repurchased under the Program were immediately retired. Repurchased shares reduced the Company’s outstanding shares and its weighted average number of shares of common stock outstanding for purposes of calculating basic and diluted earnings per share.

11. Stock-Based Compensation

Total stock-based compensation expense is recorded in the condensed consolidated statements of operations as follows (in thousands):

Equity Incentive Plan and Employee Stock Purchase Plan

Under the Company’s 2021 Equity Incentive Plan, as of September 30, 2024,31.0 million shares of Class A common stock were authorized, of which 17.0 million shares of Class A common stock were available for future issuance. The number of shares reserved for issuance was increased in January 2024 pursuant to the evergreen provisions set forth in the 2021 Equity Incentive Plan.

Under the Company’s 2021 Employee Stock Purchase Plan (the “ESPP”), as of September 30, 2024,3.7 million shares of Class A common stock were authorized. The number of shares reserved for issuance was increased in January 2024 pursuant to the evergreen provisions set forth in the ESPP.

The ESPP provides for concurrent six-month offering and purchase periods beginning February 15 and August 15 of each year. During the three months ended September 30, 2024,0.2 million shares of Class A common stock were purchased under the ESPP for an aggregate amount of $1.0 million. During the nine months ended September 30, 2024,0.4 million shares of Class A common stock were purchased under the ESPP for an aggregate amount of $3.6 million. As of September 30, 2024, the Company recorded a liability of $0.6 million related to the accumulated payroll deductions, which are refundable to employees who withdraw from the ESPP. This amount is included within accrued expenses in the condensed consolidated balance sheets.

Stock Options

A summary of the Company’s stock option activity for the nine months ended September 30, 2024 is as follows (in thousands, except weighted average information):

As of September 30, 2024, total remaining stock-based compensation expense for unvested stock options is $0.3 million, which is expected to be recognized over a weighted average period of 0.3 years.

Restricted Stock Units

On April 19, 2021, the Company granted the CEO Performance Award, which provided for a grant of 1.4 million RSUs consisting offive vesting tranches with a vesting schedule based upon achieving stock price targets as well as satisfying certain minimum service requirements. On December 21, 2023, the Company entered into the Cancellation Agreement with the CEO, which provided for the cancellation of the 1.4 million market-based RSUs included in the CEO Performance Award. As of the date of the Cancellation Agreement, none of the stock price targets set forth in the CEO Performance Award had been met and all of the RSUs were unvested. The cancellation resulted in an acceleration of $7.5 million in unrecognized stock-based compensation expense from future periods into the fourth quarter of 2023. Accordingly, the Company recordedno stock-based compensation expense related to the CEO Performance Award during the three and nine months ended September 30, 2024. During the three and nine months ended September 30, 2023, the Company recorded stock-based compensation expense of $1.5 million and $4.5 million, respectively, related to the CEO Performance Award.

For all RSUs, excluding the CEO Performance Award, the Company recorded stock-based compensation expense of $15.1 million and $49.8 million during the three and nine months ended September 30, 2024, respectively, and $16.7 million and $51.3 million during the three and nine months ended September 30, 2023, respectively.

A summary of the Company’s RSU activity for the nine months ended September 30, 2024 is as follows (in thousands, except weighted average information):

As of September 30, 2024, total unrecognized stock-based compensation expense for unvested RSUs was $113.4 million, which is expected to be recognized over a weighted average period of 1.4 years. The Company had no outstanding performance-based RSUs as of September 30, 2024.

12. Income Taxes

The Company computes its provision for income taxes by applying the estimated annual effective tax rate to pretax income or loss and adjusts the provision for discrete tax items recorded in the period. The income tax expense (benefit), effective tax rates, and statutory federal income tax rates for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages):

*The effective tax rate for the nine months ended September 30, 2024 is not meaningful as a result of the low level of loss before income taxes recorded for the period.

The effective tax rate for the three and nine months ended September 30, 2024 differed from the U.S. federal statutory tax rate of 21% primarily due to tax detriments relating to the settlement of RSUs, limitations on the amount of deductible officer compensation, state taxes, and net tax benefits from research and development tax credits.

The effective tax rate for the three and nine months ended September 30, 2023 differed from the U.S. federal statutory tax rate of 21% primarily due to state taxes, tax detriments relating to the settlement of RSUs, and limitations on the amount of deductible officer compensation, partially offset by net tax benefits from research and development tax credits.

During the three and nine months ended September 30, 2024, the Company continued to record reserves for the current year uncertain tax positions recognized within the effective tax rate. The Company believes that any change to the unrecognized tax benefits in the next 12 months will not be material to the condensed consolidated financial statements.

13. Subsequent Events

Lease Agreement

In October 2024, the Company entered into a lease agreement with SMBP LLC for 24,936 square feet of office space located at 3000 Ocean Park Blvd. Suite 3000, in Santa Monica, California with a commencement date no earlier than June 1, 2025. The Company intends to use the space for its new corporate headquarters, as the lease for its current corporate headquarters is expected to expire in May 2025. The lease has an initial term of 65 months withone five-year extension option, and is expected to commence in the second quarter of 2025. The aggregate estimated rent payments due over the initial term of the lease are approximately $8.0 million.

Increase to Share Repurchase Program

In November 2024, the Company’s board of directors authorized an increase to the Program of $100.0 million. Such amount is in addition to the Company’s previous aggregate authorization of $550.0 million.