The Company's amended and restated certificate of incorporation authorizes the issuance of 700,000,000 shares of common stock with a par value of $0.0001 per share. Shares of common stock reserved for issuance, on an as-converted basis, are as follows:


	December 31,	September 30,
	2021	2022
Options issued and outstanding	12,785,176	11,723,427
RSUs outstanding	1,508,615	4,679,719
PRSUs outstanding	—	687,500
Shares available for future issuance under 2020 plan	9,979,700	8,920,902
Shares available for issuance under ESPP	1,869,302	2,543,089
Total	26,142,793	28,554,637

In February 2022, the Board of Directors authorized the Company to purchase up to $400.0 million of common stock of the Company. The Company may repurchase shares from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended

to qualify under Rule 10b5-1. The repurchase program does not obligate the Company to acquire any particular amount of its common stock, and may be suspended or terminated by the Company at any time at its discretion without prior notice.

The Company records share repurchases on the settlement date. Repurchased shares are subsequently retired and returned to the status of authorized but unissued. The Company’s policy for share retirements is to allocate the excess between par value and the repurchase price, including costs and fees, to additional paid-in capital. During the nine months ended September 30, 2022, the Company repurchased, and subsequently retired, 4.4 million shares for $150.1 million at an average cost of $33.84 per share. As of September 30, 2022, $249.9 million remains available for future purchases of our common stock under the share repurchase program.


	Number of Options	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Balances at December 31, 2021	12,785,176	$	10.23	6.8	$	1,803,812

Options granted	1,253,496	46.63
Options exercised	(2,074,763)	5.19
Options cancelled and forfeited	(240,482)	25.79
Balances at September 30, 2022	11,723,427	14.70		6.4	151,680
Options exercisable – September 30, 2022	7,590,584	4.96		5.3	124,319
Options vested and expected to vest – September 30, 2022	11,663,853	$	14.37	6.4	$	151,478

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the fair value of the Company’s stock as of September 30, 2022. The aggregate intrinsic value of options exercised for the nine months ended September 30, 2021 and 2022, was $873.9 million and $151.7 million, respectively. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2021 and 2022, was $61.97, and $23.29 per share, respectively. The weighted-average fair value of options assumed in connection with an acquisition was $74.84 per share for the nine months ended September 30, 2021. The total fair value of options vested for the nine months ended September 30, 2021 and 2022, was $16.7 million, and $17.3 million, respectively.

As of September 30, 2022, total unrecognized stock-based compensation expense related to unvested stock options was $58.9 million, which is expected to be recognized over a remaining weighted-average period of 1.9 years.

In May 2021, the Company amended an employee stock option agreement which resulted in a modification of the vesting of a certain number of option shares. The Company valued the amended stock options as of the modification date. Based on the Black-Scholes option pricing model, incremental stock-based compensation expense of $4.4 million resulting from the modification was recognized during the nine months ended September 30, 2021.

The Company grants RSUs to employees and nonemployees. RSUs vest upon satisfaction of a service-based condition, which is generally satisfied over one to four years. The following table summarizes RSU activity for the nine months ended September 30, 2022:


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Unvested at December 31, 2021	1,508,615	$	140.10
RSUs granted	3,778,851	47.64
RSUs vested	(368,604)	130.64
RSUs cancelled and forfeited	(239,143)	114.46
Unvested at September 30, 2022	4,679,719	$	67.50

As of September 30, 2022, total unrecognized stock-based compensation expense related to outstanding unvested RSUs was $271.9 million, which is expected to be recognized over a remaining weighted-average period of 2.5 years.

In connection with the Prodigy acquisition in April 2021, 82,201 shares of the Company’s restricted stock were issued to certain Prodigy employees. The restricted stock is subject to restrictions which lapse on a quarterly basis over two years. Refer to “Note 5. Acquisitions” for further information.

As of September 30, 2022, total unrecognized stock-based compensation expense related to restricted stock was $2.6 million, which is expected to be recognized over a remaining weighted-average period of 0.6 years.

On February 18, 2022, the Compensation Committee of the Board of Directors, after extensive consultation with its independent compensation consultants, approved the grant of a PRSU award to an executive for 687,500 shares that will generally vest at the end of a period of seven years based on the achievement of certain stock price targets for the Company’s common stock.

Except as otherwise provided in the Performance Award Agreement, the PRSU award will vest only if the executive is employed on a full-time basis through January 1, 2029 (the “Final Measurement Date”) and only to the extent that the company stock price targets are met. The first time that performance will be measured is on January

1, 2027 and achievement will be determined based on the average closing price of the Company’s stock on the 60 consecutive trading days ending immediately prior to that date. If any company stock price target is met at that time, up to 40% of the cumulative PRSUs possible for such company stock price target will become eligible to vest. One year later on January 1, 2028, the same procedure will be followed and if any higher company stock price target is met, up to 80% of the cumulative PRSUs possible for such company stock price target, less any PRSUs that previously vested, will vest. On the Final Measurement Date, the same procedure will be followed and the cumulative PRSUs possible for the highest company stock price target met at such time, less any PRSUs that previously became eligible to vest, will become eligible to vest. All PRSUs which did not meet the Company stock price targets on the Final Measurement Date will be forfeited.

The ability to become eligible to vest only in up to 40% of the cumulative PRSUs possible after five years and only up to 80% of the cumulative PRSUs possible after six years was intentionally structured to ensure that sustained long-term stock price performance must be achieved. The 40% and 80% limitations do not apply in the case of a change in control prior to the Final Measurement Date.

Compensation expense associated with the PRSUs is recognized using the straight-line attribution method for each of the nine vesting tranches over the respective derived service period. The weighted-average grant date fair value using the Monte Carlo simulation was $68.76 per share. The Company recognizes stock-based compensation expense for awards subject to market-based vesting conditions regardless of whether these conditions will be achieved or not, and stock-based compensation expense for any such awards is not reversed if the market condition is not met. As of September 30, 2022, total unrecognized stock-based compensation expense related to outstanding unvested PRSUs was $41.9 million, which is expected to be recognized over a remaining weighted-average period of 4.9 years.

Our ESPP provides for consecutive six-month offering periods. The offering periods are scheduled to start on the first trading day on or after February 15 and August 15 of each year. The ESPP permits participants to purchase shares in the amount of 85% of the lower of the fair market value of our shares of common stock on the first trading day of the offering period or on the exercise date. During the nine months ended September 30, 2022, 162,796 shares of common stock were purchased under the ESPP.

In determining the fair value of stock-based awards, the Company uses a Black-Scholes option-pricing model for its options granted and ESPP purchase rights and a Monte Carlo simulation model for its PRSUs. The inputs used for estimating the fair values of options granted, ESPP purchase rights and PRSUs granted during the period include:

Fair Value of Common Stock–The fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market.

Expected Term–The expected term represents the period that the Company’s stock options and ESPP purchase rights are expected to be outstanding. We estimate the expected term based on the simplified method, which is the weighted-average time to vesting and the contractual maturity. The expected term for PRSUs is the simulation term, the time period from the valuation date to the end of the performance measurement period.

Volatility–Because the Company has not had an active trading market for its common stock for a sufficient period of time, the expected volatility is estimated based on the average volatility for comparable publicly-traded companies, over a period equal to the expected term of the stock option grants.

Risk-free Interest Rate–The risk-free interest rate assumption is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Dividends–The Company has never paid dividends on its common stock and does not anticipate paying dividends on common stock for the foreseeable future. Therefore, the Company uses an expected dividend yield of zero.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2022

2021

2022

Expected term (in years)

5.8 – 6.7

5.1 – 6.1

5.3 – 6.9

5.1 – 7.0

Expected volatility

63.03% – 63.53%

49.66% – 50.73%

63.03% – 65.01%

47.58% – 50.73%

Risk-free interest rate

0.93% – 0.93%

3.28% – 4.02%

0.62% – 1.14%

1.70% – 4.02%

Dividend yield

—%


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2022	2021	2022
Expected term (in years)	0.5	0.5	0.5 – 0.6	0.5
Expected volatility	152.95%	179.35%	61.65% – 152.95%	91.98% – 179.35%
Risk-free interest rate	0.05%	3.13%	0.05% – 0.09%	0.72% – 3.13%
Dividend yield	—%	—%	—%	—%

The Company recorded stock-based compensation in the following expense categories in its condensed consolidated statements of operations and comprehensive income (loss) for employees and nonemployees: