Following the effective date of the IPO Registration Statement, the Company maintains the 2021 Equity Incentive Plan, the 2021 Partner Studio Incentive Plan and the ESPP, all of which were adopted by the Board and approved by its stockholders.

The 2021 Equity Incentive Plan (the “2021 Plan”) provides for the grant of restricted stock units ("RSUs"), incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), restricted stock, stock appreciation rights ("SARs"), performance units, and performance shares to the Company’s employees, directors, consultants and other service providers. The total shares of the Company’s Class A common stock that were initially reserved for issuance under the 2021 Plan was 39,000,000, and provides for for an annual increase of shares, equal to the least of (a) 39,000,000 shares, (b) five percent (5%) of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (c) such other amount as the Company’s Board may determine. Immediately prior to the effectiveness of the 2021 Plan, the Company's 2011 Equity Incentive Plan (the "2011 Plan") was terminated. All outstanding awards under the 2011 Plan continue to be governed by their existing terms, and options cancelled under the 2011 Plan are added to the option pool available under the 2021 Plan.

The 2021 Partner Studio Incentive Plan (the “2021 Partner Plan”) provides for the grant of RSUs, ISOs, NSOs, SARs, performance units, and performance shares to individuals or entities engaged by the Company or a parent or subsidiary of the Company to render bona fide services to the party engaging such individual or entity. A total of 390,000 shares of the Company’s Class A common stock are reserved for issuance pursuant to the 2021 Partner Plan.

Following the IPO, the Company has only granted RSUs under the 2021 Plan and 2021 Partner Plan. RSU grants included service-based vesting condition that generally approximates 4 years. A summary of RSUs activity is as follows: (in thousands, except per share data):


	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Balances at December 31, 2020	—	—		—
Granted	7,575,963	$	60.18
Vested	(126,234)	62.15
Cancelled	(126,325)	59.92
Balances at December 31, 2021	7,323,404	$	60.15	$	690,304

As of December 31, 2021, there was $375.9 million of unrecognized compensation cost related to unvested employee RSUs. This amount is expected to be recognized over a weighted-average period of 3.7 years. The fair value as of the respective vesting dates of RSUs that vested during the year ended December 31, 2021 was $11.9 million.

The ESPP permits participants to purchase shares of the Company’s Class A common stock through contributions of up to 15% of their eligible compensation.The ESPP provides for consecutive, overlapping 24-month offering periods, during which the contributed amount by the participant will be used to purchase shares of the Company’s Class A common stock at the end of each 6-month purchase period with the purchase price of the shares being 85% of the lower of the fair market value of the Company’s Class A common stock on the first day of an offering period or on the exercise date. A participant may purchase a maximum of 590 shares of the Company’s Class A common stock during a purchase period. Participants may end their participation at any time during an offering and will be paid their accrued contributions that have not yet been used to purchase shares. Participation ends automatically upon termination of employment with the Company.

A total of 7,800,000 shares of the Company’s Class A common stock are reserved for issuance under the ESPP. The number of shares of the Company’s Class A common stock that will be available for sale under the ESPP, and provides for an annual increase of shares, equal to the least of: (a) 7,800,000 shares, (b) one percent (1%) of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (c) such other amount as the Company’s board of directors may determine. The initial offering period is from April 15, 2021 through November 19, 2023. During the year ended December 31, 2021, 42,303 shares of Class A common stock have been purchased under the ESPP.

The weighted-average assumptions used to estimate the fair value of shares to be issued under the ESPP are as follows:


	Year Ended December 31,
	2021
Weighted-average expected term	1.25
Expected volatility	44	%
Risk-free interest rate	0.17	%
Dividend yield	0	%

The Company’s 2011 Plan provides for the grant of stock options to employees, directors, consultants, and service providers of the Company. Options under the 2011 Plan may be granted for periods of up to 10 years and generally vest over four years. As noted above, immediately prior to the effectiveness of the 2021 Plan, the 2011 Plan was terminated, and no further awards will be granted thereunder. All outstanding awards under the 2011 Plan continue to be governed by their existing terms, and options cancelled under the 2011 Plan are added to the option pool available under the 2021 Plan.

Stock Options—During the years ended December 31, 2021, 2020 and 2019, the Company granted stock options to purchase 263,200, 13,158,430 and 12,199,200 shares of common stock, with a weighted-average grant date stock fair value of $48.14, $15.94 and $1.97 per share, respectively.


	Number of Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)
Balances at December 31, 2020	28,889,524	$	5.92	8.8
Granted	263,200	27.03
Exercised	(8,947,563)	5.40
Forfeited	(1,411,457)	6.42
Expired	(390,000)	7.45
Balances at December 31, 2021	18,403,704	$	6.39	7.9
Vested and exercisable at December 31, 2021	12,030,363	$	5.87	7.8
Vested and expected to vest at December 31, 2021	16,696,145	$	6.63	8.0

The aggregate intrinsic value of options outstanding as of December 31, 2021 and 2020, was $1.62 billion and $1.83 billion, respectively. As of December 31, 2021 there was approximately $70.1 million of total unrecognized compensation costs related to unvested options granted, which is expected to be recognized over the weighted-average vesting period of 2.3 years. The total intrinsic value of share options exercised during the years ended December 31, 2021, 2020, and 2019 was $622.1 million, $33.8 million and $1.8 million, respectively.

Early Exercise of Stock Options—Subject to the Board’s approval, the Plan allows for the early exercise of options granted. Under the terms of the Plan, option holders, upon early exercise, must sign a restricted stock purchase agreement that gives the Company the right to repurchase any unvested shares, at the original exercise price, in the event the optionees’ employment terminates for any reason. The right to exercise options before they are vested does not change existing vesting schedules in any way and the early exercised options may not be sold or transferred before they are vested. The repurchase right lapses over time as the shares vest at the same rate as the original option vesting

schedule. The cash amounts received in exchange for these early exercised shares are recorded as a liability on the accompanying balance sheets and reclassified into common stock and additional paid-in-capital as the shares vest. The Company’s right to repurchase these shares lapses by 1/4th of the shares on the one-year anniversary of the vesting start date and ratably each month over the next 36-months.

The Company has 486,999 shares and 19,800 shares of Class A common stock subject to repurchase as of December 31, 2021 and 2020, respectively. The liability for the repurchase as of December 31, 2021 and 2020 included in accrued liabilities was $1.4 million and $0.1 million, respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company provided financing to certain employees in the form of promissory notes to early exercise stock options. These promissory notes are partially collateralized by shares and in-substance are nonrecourse. For accounting purposes, exercised options via nonrecourse promissory notes are not substantive and are continued to be treated as options. In February 2021, promissory notes issued to executive officers in the amount of $20.9 million were settled through either share repurchase, in the amount of $17.2 million, or cash payment, in the amount of $3.7 million. In connection with the repurchase of shares, the Company accelerated vesting of 60,968 shares of Class A common stock for one of the Company’s officers. The acceleration of vesting was accounted as an option modification with an immaterial impact to the stock-based compensation expense.

As of December 31, 2021 and 2020, the Company had 2,884,999 and 8,022,499 shares of Class A common stock options, respectively, that were exercised via nonrecourse promissory notes of which 663,856 and 4,136,677 shares, respectively, were unvested and subject to repurchase. The principal balances of nonrecourse promissory notes outstanding amounted to $15.1 million and $40.4 million as of December 31, 2021 and 2020, respectively.

Restricted Stock—Restricted stock awards are classified as equity awards based on the requirements established by the applicable accounting rules for stock-based compensation. The fair value of the restricted stock awards was determined based on the price of the Company’s valuation on the date of grant as approved by the Company’s board of directors.

The Company has historically granted restricted stock awards to certain employees. Restricted stock award activity for the periods presented herein has not been material. As of December 31, 2021 there was $0.3 million of total unrecognized compensation cost related to unvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 0.7 years.


	Year Ended December 31,
	2021		2020		2019
Cost of revenue	$	2,335	$	982	$	124
Sales and marketing	15,224		10,668		1,922
Research and development	63,344		36,852		5,009
General and administrative	52,274		13,885		3,167
Total stock-based compensation expense	$	133,177	$	62,387	$	10,222

For the years ended December 31, 2021, 2020 and 2019 total stock-based compensation expense included $1.2 million, $0.9 million and nil associated with awards that may be settled with one of the Company’s subsidiaries, respectively.