STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2024

Common Stock

The Company has two classes of authorized common stock outstanding: Class A common stock and Class B common stock. Class A common stock and Class B common stock are referred to as "common stock" throughout these Notes to the Consolidated Financial Statements, unless otherwise noted. Holders of the Company's Class A common stock and Class B common stock are entitled to dividends when, as and if, declared by the Company's board of directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. As of December 31, 2024, the Company did not declare any dividends. Holders of shares of Class A common stock are entitled to one vote per share, while holders of shares of Class B common stock are entitled to ten votes per share. Shares of the Company's Class B common stock are convertible into an equivalent number of shares of its Class A common stock and generally convert into shares of its Class A common stock upon transfer. The holders of Class A common stock and Class B common stock have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares.

Warrants

In conjunction with the 2025 Convertible Notes offering, the Company sold the 2025 Warrants whereby the counterparties have the option to purchase a total of approximately 8.3 million shares of the Company’s Class A common stock at a price of $161.34 per share. The 2025 Warrants expire evenly over a 60 trading day period starting on June 1, 2025. None of the warrants were exercised as of December 31, 2024.

In conjunction with the 2026 Convertible Notes offering, the Company sold the 2026 Warrants whereby the counterparties have the option to purchase a total of approximately 1.9 million shares of the Company’s Class A common stock at a price of $368.16 per share. The 2026 Warrants expire evenly over a 60 trading day period starting on August 1, 2026. None of the warrants were exercised as of December 31, 2024.

In conjunction with the 2027 Convertible Notes offering, the Company sold the 2027 Warrants whereby the counterparties have the option to purchase a total of approximately 1.9 million shares of the Company’s Class A common stock at a price of $414.18 per share. The 2027 Warrants expire evenly over a 60 trading day period starting on February 1, 2028. None of the warrants were exercised as of December 31, 2024.

Share Repurchase Program

In October 2023, the board of directors of the Company authorized the repurchase of up to $1 billion of the Company’s Class A common stock. On July 25, 2024, the board of directors of the Company authorized an increase to the Company's share repurchase program to repurchase up to an additional $3 billion of the Company’s Class A common stock. During the year ended December 31, 2024, the Company repurchased 16.9 million shares of its Class A common stock for an aggregate amount of $1.2 billion. As of December 31, 2024, $2.7 billion remained available and authorized for repurchases under this share repurchase program.

Repurchases may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate the Company to acquire any particular amount of its Class A common stock and may be suspended at any time at the Company’s discretion. The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

Stock Plans

The Company maintains two share-based employee compensation plans: the 2009 Stock Plan ("2009 Plan") and the 2015 Equity Incentive Plan ("2015 Plan"). The 2015 Plan serves as the successor to the 2009 Plan. The 2015 Plan became effective as of November 17, 2015. Outstanding awards under the 2009 Plan continue to be subject to the terms and conditions of the 2009 Plan. Since November 17, 2015, no additional awards have been nor will be granted in the future under the 2009 Plan. As of December 31, 2024, the total number of shares subject to stock options ("ISOs" and "NSOs", respectively), restricted stock awards ("RSAs"), and restricted stock units ("RSUs") outstanding under the 2009 Plan was 0.3 million shares.

Under the 2015 Plan, shares of the Company's Class A common stock are reserved for the ISOs and NSOs, RSAs, RSUs, performance shares, and stock bonuses to qualified employees, directors, and consultants. The awards must be granted at a price per share not less than the fair market value at the date of grant. Initially, 30 million shares were reserved under the 2015 Plan and any shares subject to options or other similar awards granted under the 2009 Plan that expire, are forfeited, are repurchased by the Company or otherwise terminate unexercised will become available under the 2015 Plan. The number of shares available for issuance under the 2015 Plan has been and will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 40 million shares, (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator of the Plan. The administrator consists of the Board of Directors who then delegates the responsibilities to the Compensation Committee. As of December 31, 2024, the total number of shares subject to stock options, RSAs, and RSUs outstanding under the 2015 Plan was 39 million shares, and 138 million shares were available for future issuance.

A summary of stock option activity for the year ended December 31, 2024 is as follows (in thousands, except share and per share data):


	Number of Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding, beginning of the period	4,991	$	47.64	3.80	$	195,760
Granted	578	74.03
Exercised	(2,646)	23.14
Forfeited	(249)	78.73
Expired	(96)	142.49
Outstanding, end of the period	2,578	$	72.17	5.11	$	67,966

Exercisable, end of the period	1,952	$	70.00	3.95	$	60,701

Aggregate intrinsic value represents the difference between the Company’s estimated fair value of its common stock and the exercise price of outstanding, in-the-money options. Aggregate intrinsic value for stock options exercised for the years ended December 31, 2024, 2023, and 2022 was $145.1 million, $96.1 million, and $211.0 million, respectively.

The total weighted-average grant-date fair value of options granted was $45.81, $39.13, and $73.31 per share for the years ended December 31, 2024, 2023, and 2022, respectively.

Restricted Stock Activity

Activity related to RSUs during the year ended December 31, 2024 is set forth below:


	Number of Shares	Weighted Average Grant Date Fair Value
Unvested, beginning of the period	40,099	$	74.76
Granted	22,328	71.26
Vested	(16,223)	79.90
Forfeited	(9,125)	74.32
Unvested, end of the period	37,079	$	70.51

The total fair value of shares vested was $1.2 billion, $873.0 million, and $724.2 million in the years ended December 31, 2024, 2023, and 2022, respectively.

Employee Stock Purchase Plan

On November 17, 2015, the Company’s 2015 Employee Stock Purchase Plan ("ESPP") became effective. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 25%, subject to any plan limitations. The ESPP provides for 12-month offering periods. The offering periods are scheduled to start on the first trading day on or after May 15 and November 15 of each year. Each offering period includes two purchase periods, which begin on the first trading day on or after November 15 and May 15, and ending on the last trading day on or before May 15 and November 15, respectively. Employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or the last trading day of the purchase period. The number of shares available for sale under the ESPP will be increased annually on the first day of each fiscal year, equal to the least of (i) 8.4 million shares, (ii) 1% of the outstanding shares of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (iii) such other amount as determined by the administrator. As of December 31, 2024, 11 million shares had been purchased under the ESPP and 34 million shares were available for future issuance under the ESPP.

Share-Based Compensation

The fair values of stock options granted were estimated using the following weighted-average assumptions:


	Year Ended December 31,
	2024		2023		2022

Dividend yield	—	%	—	%	—	%
Risk-free interest rate	4.65	%	3.48	%	3.08	%
Expected volatility	62.92	%	62.32	%	59.20	%
Expected term (years)	6.02		6.02		6.02

The following table summarizes the effects of share-based compensation on the consolidated statements of operations (in thousands):


	Year Ended December 31,
	2024		2023		2022
Cost of revenue	$	707	$	601	$	494
Product development	903,262		902,130		701,715
Sales and marketing	131,233		130,665		105,231
General and administrative	237,355		242,701		261,849
Total	$	1,272,557	$	1,276,097	$	1,069,289

The Company recorded tax benefits related to stock-based compensation expense of $322.0 million, $228.2 million and $218.9 million, during the years ended December 31, 2024, 2023, and 2022, respectively.

The Company recorded $25.0 million, $63.3 million, and $61.4 million of share-based compensation expense related to the Company's 2015 Employee Stock Purchase Plan during the years ended December 31, 2024, 2023 and 2022, respectively. The total share-based compensation expense for the year ended December 31, 2022 includes a $66.3 million one-time charge related to the acceleration of various share-based arrangements associated with the acquisition of Afterpay.

The Company capitalized $41.2 million, $30.9 million, and $20.7 million of share-based compensation expense related to capitalized software during the years ended December 31, 2024, 2023, and 2022, respectively.

As of December 31, 2024, there was $2.6 billion of total unrecognized compensation cost related to outstanding stock options and restricted stock awards that are expected to be recognized over a weighted-average period of 3 years.