11. Stock-Based Compensation

2020 Executive Equity Incentive Plan

In August 2020, the Company’s Board of Directors approved the 2020 Executive Equity Incentive Plan (the “Executive Equity Plan”). The Executive Equity Plan permitted the granting of NSOs and RSUs to the Company’s employees, consultants, and directors. A total of 165,900,000 shares of the Company’s Class B common stock were reserved for issuance under the Executive Equity Plan. During August 2020, options to purchase 162,000,000 shares of Class B common stock and restricted stock units covering 3,900,000 shares of the Company’s Class B common stock were granted to certain officers.

The Executive Equity Plan was terminated prior to the Company’s Direct Listing, and no additional awards will be granted under the Executive Equity Plan. However, the Executive Equity Plan will continue to govern the terms and conditions of the outstanding awards previously granted under the Executive Equity Plan.

2020 Equity Incentive Plan

In September 2020, prior to the Direct Listing, the Company’s Board of Directors approved the 2020 Equity Incentive Plan (“2020 Plan”). The 2020 Plan provides for the grant of ISOs, NSOs, restricted stock, RSUs, SARs,

and performance awards to the Company’s employees, directors, and consultants. A total of 150,000,000 shares of the Company’s Class A common stock were initially reserved for issuance pursuant to the 2020 Plan. In addition, the number of shares of Class A common stock reserved for issuance under the 2020 Plan includes certain shares of common stock subject to awards under the 2010 Plan and Executive Equity Plan in the case of certain occurrences such as expirations, terminations, exercise and

tax-related

withholding, or failures to vest. Shares of Class B common stock added to the 2020 Plan from the 2010 Plan or Executive Equity Plan are reserved for issuance under the Company’s 2020 Plan as Class A common stock. The number of shares of Class A common stock available for issuance under the 2020 Plan will also include an annual increase on the first day of each fiscal year beginning on January 1, 2022, equal to the least of:

•

250,000,000 shares of the Company’s Class A common stock;

•

Five percent of the outstanding shares of the Company’s common stock as of the last day of the immediately preceding fiscal year; or

•

such other amount as the administrator of the 2020 Plan determines.

Under the 2020 Plan, the exercise price of options granted is generally at least equal to the fair market value of the Company’s Class A common stock on the date of grant. The term of an ISO generally may not exceed

ten

years. Additionally, the exercise price of any ISO granted to a 10% stockholder shall not be less than 110% of the fair market value of the common stock on the date of grant, and the term of such option grant shall not exceed five years. Options and other equity awards become vested and, if applicable, exercisable based on terms determined by the Board of Directors or another plan administrator on the date of grant, which is typically four years for new employees and varies for subsequent grants.

Stock Options

The following table summarizes stock option activity for the year ended December 31, 2021 (in thousands, except per share amounts):


	Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value

Balance as of December 31, 2020		535,767		$	6.12		7.99	$	9,340,245
Options exercised		(178,849	)		2.84		—
Options canceled and forfeited		(6,966	)		5.12		—

Balance as of December 31, 2021		349,952		$	7.81		9.06	$	3,638,685

Options vested and exercisable as of December 31, 2021		169,563		$	5.10		7.75	$	2,223,706

The aggregate intrinsic value of options outstanding, and vested and exercisable is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock as of December 31, 2021. The aggregate intrinsic value of options exercised during the years ended December 31, 2021, 2020, and 2019 was $3.8 billion, $974.2 million, and $90.7 million, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock on the exercise date.

There were no

options granted during the year ended December 31, 2021. The weighted average grant-date fair value of options granted during the years ended December 31, 2020 and 2019 was $2.57 and $3.67 per share, respectively. The total grant-date fair value of options that vested during the years ended December 31, 2021, 2020, and 2019 was $189.5 million, $214.7 million, and $229.4 million, respectively.

As of December 31, 2021, the unrecognized expense related to options outstanding was $888.6 million, which is expected to be recognized over a weighted-average service period of eight years.

Determination of Stock Option Fair Value

The estimated grant-date fair value of all the Company’s stock-based option awards was calculated using the Black-Scholes option-pricing model, based on the below assumptions. There were no options granted during the year ended December 31, 2021.


	Years Ended December 31,
	2020			2019

Fair value of common stock	$	7.60		$	6.03
Expected volatility		71.00	%		65.00	%
Expected term (in years)		12.04			6.36
Expected dividend yield		—	%		—	%
Risk-free interest rate		0.64	%		1.65	%

RSUs

The following table summarizes the RSU activity for the year ended December 31, 2021 (in thousands, except per share amounts):


	RSUs Outstanding			Weighted Average Grant Date Fair Value per Share

RSUs unvested and outstanding as of December 31, 2020		184,870		$	6.97
RSUs granted		28,097			24.08
RSUs vested		(50,350	)		8.36
RSUs canceled		(8,868	)		8.07

RSUs unvested and outstanding as of December 31, 2021		153,749		$	9.56

Prior to September 30, 2020, the Company granted RSUs with both a service-based vesting condition and a liquidity event-related performance condition which was considered a performance-based vesting condition. The stock-based compensation expense related to such RSUs is recognized using the accelerated attribution method from the grant date. The service-based vesting period for these awards varies across service providers and is up to five years. The performance-based vesting condition for the RSUs was satisfied upon the Company’s Direct Listing, which occurred on September 30, 2020. Additionally, subsequent to September 30, 2020 the Company granted RSUs with only a service based-based vesting condition. The stock-based compensation expense related to such RSUs is recognized ratably over the service period.

During the year ended December 31, 2020, the Company recognized $940.0 million in stock-based compensation expense related to RSUs, of which $769.5 million was recognized upon the Company’s Direct Listing which satisfied the performance-based vesting condition. No compensation expense related to RSUs was recognized for the year ended December 31, 2019 as the performance-based vesting condition was not achieved.

The total grant-date fair value of RSUs vested during the years ended December 31, 2021 and 2020 was $421.0 million and $531.9 million. As of December 31, 2021, the total unrecognized stock-based compensation expense related to the RSUs outstanding was $922.4 million, which is expected to be recognized over a weighted-average service period of three years.

Stock-based Compensation Expense

Total stock-based compensation expense was as follows (in thousands):


	Years Ended December 31,
	2021		2020		2019
Cost of revenue	$	68,546	$	139,627	$	27,904
Sales and marketing		242,910		398,205		79,215
Research and development		150,298		357,063		67,933
General and administrative		316,461		375,807		66,918
Total stock-based compensation expense	$	778,215	$	1,270,702	$	241,970

The Company did not recognize any tax benefits related to stock-based compensation expense during the year ended December 31, 2021

and it recognized tax benefits of $18.2 million and $6.4 million during the years ended December 31, 2020 and 2019, respectively.