STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock plans

The Company maintains four equity incentive plans: the 2013 Plan, the 2019 Plan, and the 2021 Plan (together, the “Plans”), and the ESPP. Following the Direct Listing, the Company has only issued awards under the 2021 Plan and the ESPP, and no additional awards will be granted under the 2013 Plan and 2019 Plan. In addition, certain of the Company’s existing options assumed in connection with acquisitions are governed by the terms of the acquired company’s equity awards plan.

In February 2021, the Board approved and adopted the 2021 Plan. The 2021 Plan became effective on March 31, 2021, the date immediately prior to the effective date of the Company’s registration statement for the Direct Listing. The 2021 Plan serves as the successor to the 2019 Plan. Outstanding awards under the 2013 Plan and 2019 Plan continue to be subject to their original terms and conditions. The 2021 Plan provides for the granting of incentive stock options, RSUs, restricted stock, stock appreciation rights and performance and stock bonus awards to assist in attracting, retaining and motivating employees. The number of shares available for grant and issuance under the 2021 Plan will be automatically increased on January 1st of each of the first ten fiscal years during the term of the 2021 Plan by the lesser of (a) five percent of the total number of shares of all classes of the Company’s common stock issued and outstanding on an as converted to common stock basis on each December 31st immediately prior to the date of increase or (b) such number of shares determined by the Board.

As of December 31, 2022 and 2021, only stock options and RSUs were issued and outstanding under the Plans.

Stock options

Options granted under the Plans may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees and non-employees.

Options under the Plans may be granted for contractual periods of up to ten years and at prices determined by the Board, provided, however, that the exercise price of an ISO and NSO shall not be less than 100% of the estimated fair value of the underlying shares on the date of the grant (110% if granted to a stockholder who owns more than ten percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary).

Under the 2013 Plan and 2019 Plan, options granted to new employees of the Company generally vest over four years and vest at a rate of 25% upon the first anniversary of the issuance date and 1/48 per month thereafter. Refresher options granted to existing employees of the Company generally vest in equal monthly installments over four years. No additional awards have been or will be granted under the 2013 Plan and 2019 Plan following the Company’s Direct Listing.

Under the 2021 Plan, options are granted to executives and eligible non-executive employees which vest in equal quarterly installments over a period of three years.

The 2013 Plan and 2019 Plan allow for a seven-year exercise window post-termination for employees of the Company who have provided at least two years of continuous service to the Company as of their termination date.

Activity of options outstanding are as follows (in thousands, except per share and years data):


	Options Outstanding	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance at January 1, 2022	37,208	$	18.60	7.83	$	8,698,078
Granted	937	177.79
Exercised	(3,858)	13.32
Forfeited and cancelled	(2,492)	26.57

Balance at December 31, 2022	31,795	$	23.31	6.95	$	504,222

Vested and exercisable at December 31, 2022	19,205	$	19.25	6.53	$	351,598
Vested and expected to vest at December 31, 2022	25,690	$	23.27	6.79	$	431,404

During the year ended December 31, 2022, the Company granted stock options for the purchase of 937,247 shares of the Company’s Class A common stock with a weighted-average grant date fair value of $82.30 per share to certain employees of the Company. The stock options vest over three years at a rate of 1/12 per quarter.

As of December 31, 2022, there was total unrecognized compensation cost of $130.2 million related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately 2.3 years.

The intrinsic value is calculated as the difference between the exercise price of the underlying stock option award and the estimated fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 was $336.3 million and $5.9 billion, respectively.

During the year ended December 31, 2022, 7,592,673 stock options vested with a weighted-average grant date fair value of $12.46 per share. During the year ended December 31, 2021, 14,966,504 stock options vested with a weighted-average grant date fair value of $8.74 per share.

The assumptions used under the Black-Scholes-Merton Option-Pricing Model and the weighted average calculated value of the options granted to employees were as follows:


	Year Ended December 31,
	2022		2021
Dividend yield	0.0	%	0.0	%
Expected volatility	59.3	%	44.0	%
Expected term (in years)	5.8		4.8
Risk-free interest rate	2.1	%	0.5	%

Early exercise of stock options

Stock options granted under the Plans provide employee option holders the right to exercise unvested options for restricted common stock, which is subject to a repurchase right held by the Company at the original purchase price in the event the optionee’s employment is terminated either voluntarily or involuntarily prior to vesting of the exercised stock. Early exercises of options are not deemed to be substantive exercises for accounting purposes and accordingly, amounts received for early exercises are recorded as a liability. These repurchase terms are considered to be a forfeiture provision and do not result in variable accounting. As of December 31, 2022 and 2021, there were 166,481 and 478,271 shares, respectively, subject to repurchase related to stock options early exercised and not yet vested, but that are expected to vest. These amounts are reclassified to common stock and additional paid in capital as the underlying shares vest. As of December 31, 2022 and 2021, the Company recorded a liability related to these shares subject to repurchase in the amount of $3.3 million and $8.9 million, respectively, which is included within accrued expenses and other current liabilities on the accompanying consolidated balance sheets.

Chief Executive Officer performance award

On August 11, 2020, the Company granted its Chief Executive Officer an option award to purchase up to 9,293,911 shares of the Company’s Class A common stock, at an exercise price of $23.46 per share. Vesting of the award is dependent on both performance-based and market-based conditions being met.

The performance condition was contingent on the Company’s registration statement being declared effective by the SEC under the Securities Act. The occurrence of this event was considered to not be probable until such time that it occurred. The market condition is contingent on the Company’s Class A common stock price achieving stock price target milestones.

The total grant date fair value of this award was $56.7 million. The Company determined the fair value of the option using a Monte Carlo Simulation Model (a binomial lattice-based valuation model). The Monte Carlo Simulation Model uses multiple input variables to determine the probability of satisfying the market condition requirements. The fair value of the option is not subject to change based on future market conditions. Once the performance condition becomes probable of being achieved, the fair value of the option is recognized as compensation expense over the requisite service period, using the accelerated attribution method regardless of whether, and the extent to which, the market condition is ultimately satisfied.

During April 2021, as a result of the Company’s registration statement being declared effective by the SEC, the performance condition of the option award granted to the Chief Executive Officer was met. On July 8, 2021, the first price target of the award was met, resulting in the vesting of 3,159,930 shares subject to the option award. During the years ended December 31, 2022, 2021 and 2020, compensation expense of $3.9 million, $29.5 million and $0 was recognized related to this award, respectively.

Restricted stock units

The Company’s RSUs vest upon the satisfaction of a service-based condition. In general, the RSUs vest over a service period ranging from one to four years. Once vested, the RSUs are settled by delivery of the Company’s Class A common stock.

Activity of RSUs outstanding are as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value per Share
Balance at January 1, 2022	7,482	$	157.22
Granted	11,867	112.35
Vested	(12,107)	125.75
Forfeited and cancelled	(1,913)	159.25
Balance at December 31, 2022	5,329	$	127.85

For RSUs granted during the year ended December 31, 2022, the closing price of the Company’s Class A common stock as reported on The Nasdaq Global Select Market on the grant date was used as the fair value.

In December 2022, the Company modified certain RSU awards held by 1,198 employees to accelerate vesting of the remaining unvested awards on December 21, 2022 instead of the original vest date of February 20, 2023. The modification of awards did not result in any incremental compensation cost, however $36.1 million of stock-based compensation expense was accelerated and recognized upon modification.

As of December 31, 2022, there was total unrecognized compensation cost of $605.7 million related to unvested RSUs. These costs are expected to be recognized over a weighted-average period of approximately 2.0 years.

Restricted common stock

As part of the Company’s acquisitions, the Company has issued shares of restricted Class A common stock. Vesting of this restricted Class A common stock is dependent on a service-based vesting condition that is generally satisfied over three years. The Company has the right to repurchase shares at par value for which the vesting condition is not satisfied. Activity of shares of restricted Class A common stock is as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value per Share
Balance at January 1, 2022	2,014	$	137.57
Granted	323	137.05
Vested	(1,051)	136.57
Forfeited and cancelled	(11)	60.15
Balance at December 31, 2022	1,275	$	139.72

As of December 31, 2022, there was total unrecognized compensation cost of $135.1 million related to unvested restricted Class A common stock. These costs are expected to be recognized over a weighted-average period of approximately 1.4 years.

Employee Stock Purchase Plan

In February 2021, the Board approved and adopted the ESPP. The ESPP became effective on April 1, 2021, the effective date of the Company’s registration statement for the Direct Listing. The ESPP allows eligible employees the option to purchase shares of the Company's Class A common stock at a 15% discount, over a series of offering periods through accumulated payroll deductions over the period. The ESPP also includes a look-back provision for the purchase price if the stock price on the purchase date is lower than the stock price on the offering date. The Company recognizes stock-based compensation expenses related to purchase rights issued pursuant to its ESPP on a straight-line basis over the offering period, which is 24 months. The fair value of purchase rights under the ESPP is estimated on the date of grant using the Black-Scholes-Merton Option-Pricing Model.

The number of shares available for grant and issuance under the ESPP will be automatically increased on January 1st of each of the first ten fiscal years during the term of the ESPP by the lesser of (a) one percent of the total number of shares of all classes of the Company’s common stock outstanding on an as converted to common stock basis on each December 31st immediately prior to the date of increase or (b) such number of shares determined by the Board or the compensation committee of the Board.

The grant date of the initial offering period was May 3, 2021, and that offering period will end on April 30, 2023. Subsequent offering periods will commence in each May and November after the start of the initial offering period. For the year ended December 31, 2022, total compensation expense of $28.4 million was recognized related to the ESPP. As of December 31, 2022, the Company recorded a liability of $6.7 million related to the accumulated payroll deductions, which are refundable to employees who withdraw from the ESPP. This amount is included within accrued expenses and other current liabilities on the accompanying consolidated balance sheets.

Stock-based compensation expense

Stock-based compensation is included in the following components of expenses on the accompanying consolidated statements of operations (in thousands):


	Year Ended December 31,
		2022		2021		2020
Technology and development		$	1,093,983	$	571,861	$	36,869
Sales and marketing		76,153		32,944		1,566
General and administrative		395,687		215,880		34,190

Total		$	1,565,823	$	820,685	$	72,625

During the years ended December 31, 2022, 2021 and 2020, $118.0 million, $3.5 million and $3.0 million of stock-based compensation expense was included in capitalized software, respectively.